What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-06 compared with 2020-11-10 · 1465 added, 696 removed, 209 unchanged (91% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

Current assets:

5 unchanged sentences

Total current assets

Property and equipment, net of accumulated depreciation of $1,142,540 and $1,140,143, respectively

Marketable investment securities

Liabilities and Stockholders' Equity

9 unchanged sentences

Stockholders' equity:

Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized;

Preferred stock, par value $0.0001 per share, 10,000,000

shares authorized;

zero issued and outstanding

Common stock, par value $0.0001 per share, 100,000,000 shares authorized;

Common stock, par value $0.0001 per share, 100,000,000 shares

88,296,360 and 70,041,967 issued and 88,290,650 and 70,036,257 outstanding

1 unchanged sentence

Treasury stock at cost, 5,710 shares

Accumulated other comprehensive gain (loss)

Accumulated other comprehensive loss

Accumulated deficit

4 unchanged sentences

See accompanying notes to unaudited condensed consolidated financial statements

LIPOCINE INC.

AND SUBSIDIARIES

Condensed Consolidated Statements

of Operations and Comprehensive Loss

Three Months Ended September 30,

Nine Months Ended September 30,

License revenue

Total revenues

Condensed Consolidated Statements of Operations and Comprehensive Loss

Three Months Ended March 31,

Operating expenses:

3 unchanged sentences

Operating loss

(13,194,590 )

Other income (expense):

1 unchanged sentence

Interest expense

Gain (loss) on warrant liability

Unrealized loss on warrant liability

Total other expense, net

Loss before income tax expense

(16,453,343 )

Income tax expense

1 unchanged sentence

$ (5,770,651 )

$ (16,453,543 )

$ (9,715,269 )

Basic loss per share attributable to common stock

5 unchanged sentences

$ (5,770,651 )

$ (16,453,543 )

$ (9,715,269 )

Net unrealized gain (loss) on available-for-sale securities

2 unchanged sentences

$ (5,770,613 )

$ (16,453,030 )

$ (9,714,045 )

accompanying notes to unaudited condensed consolidated financial statements

See accompanying notes to unaudited condensed consolidated financial statements

LIPOCINE INC.

AND SUBSIDIARIES

Condensed Consolidated Statements

of Changes in Stockholders’

For the Three and Nine Months

Ended September 30, 2020 and 2019

Comprehensive

Stockholders'

Balances at June 30, 2019

$ 154,600,442

$ (144,714,914 )

Unrealized net loss on

marketable investment securities

Stock-based compensation

Common stock sold through

Option exercises

Balances at September

$ 155,318,402

$ (147,775,114 )

Condensed Consolidated Statements of Changes in Stockholders’

For the Three Months Ended March 31, 2021 and 2020

Comprehensive

5 unchanged sentences

marketable investment securities

Stock-based compensation

Common stock sold through

Option exercises

Balances at September

$ 155,318,402

$ (147,775,114 )

Comprehensive

Stockholders'

Balances at June 30, 2020

$ 176,327,120

$ (163,207,474 )

Unrealized net gain on

marketable investment securities

Stock-based compensation

Vesting of restricted

Common stock issued for

warrant exercises

Settlement of warrant

liability on warrant exercises

Common stock sold through

Balances at September

sold through equity offering

issued for warrant exercises

at March 31, 2020

$ 163,426,502

$ (156,837,840 )

Comprehensive

Stockholders'

Balances at December 31,

1 unchanged sentence

$ (172,032,008 )

(16,453,543 )

Unrealized net gain on

Unrealized net loss on

marketable investment securities

Stock-based compensation

Vesting of restricted

Common stock sold through

equity offering

Common stock issued for

warrant exercises

Settlement of warrant

liability on warrant exercises

Common stock sold through

Balances at September

Option exercises

sold through equity offering

issued for warrant exercises

of warrant liability on warrant exercises

sold through ATM offering

at March 31, 2021

$ 217,845,280

$ (175,400,090 )

See accompanying notes to unaudited condensed consolidated

financial statements

accompanying notes to unaudited condensed consolidated financial statements

LIPOCINE INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Cash

Nine Months Ended September 30,

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31,

Cash flows from operating activities:

1 unchanged sentence

$ (5,770,651 )

Adjustments to reconcile net loss to cash used in operating activities:

Adjustments to reconcile net loss to

cash used in operating activities:

Depreciation expense

2 unchanged sentences

Non-cash loss on change in fair value of warrant liability

Amortization of discount on marketable investment securities

Amortization of premium (discount) on marketable investment securities

Changes in operating assets and liabilities:

4 unchanged sentences

Cash used in operating activities

(11,619,069 )

Cash flows from investing activities:

3 unchanged sentences

Cash provided by (used in) investing activities

(33,994,221 )

Cash flows from financing activities:

Debt repayments

Proceeds from debt

Proceeds from stock option exercises

Net proceeds from common stock offering

Net proceeds from sale of common stock through ATM

Net proceeds from exercise of warrants

Proceeds from stock option exercises

Net proceeds exercise of warrants

Cash provided by financing activities

Net increase (decrease) in cash, cash equivalents, and restricted cash

Cash, cash equivalents, and restricted cash at beginning of period

Cash, cash equivalents, and restricted cash at end of period

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

Supplemental disclosure of cash flow information:

Interest paid

Income taxes paid

Supplemental disclosure of non-cash investing and financing activity:

Settlement of warrant liability on warrant exercises

Net unrealized gain on available-for-sale securities

Accrued final payment charge on debt

Other accrued interest

See accompanying notes to unaudited condensed consolidated

financial statements

LIPOCINE INC.

Notes to Condensed Consolidated Financial

Net unrealized gain or loss on available-for-sale securities

See accompanying notes to unaudited condensed consolidated financial statements

Notes to Condensed Consolidated Financial Statements

(1) Basis of Presentation

The accompanying unaudited condensed consolidated

financial statements included herein have been prepared by Lipocine Inc.

(“Lipocine” or the “Company”)

in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”).

The unaudited

condensed consolidated financial statements are comprised of the financial statements of Lipocine and its subsidiaries, collectively

referred to as the Company.

In management's opinion, the interim financial data presented includes all adjustments (consisting

solely of normal recurring items) necessary for fair presentation.

All intercompany accounts and transactions have been eliminated.

accompanying unaudited condensed consolidated financial statements included herein have been prepared by Lipocine Inc.

(“Lipocine”

or the “Company”) in accordance with the rules and regulations of the United States Securities and Exchange Commission

(“SEC”).

The unaudited condensed consolidated financial statements are comprised of the financial statements of Lipocine and

its subsidiaries , collectively referred to as the Company.

In management's opinion, the interim financial data presented includes

all adjustments (consisting solely of normal recurring items) necessary for fair presentation.

All intercompany accounts and transactions

have been eliminated.

Certain information required by U.S.

generally accepted accounting principles has been condensed or omitted in accordance with

rules and regulations of the SEC.

Operating results for the three and nine months ended September 30, 2020 are not necessarily

indicative of the results that may be expected for any future period or for the year ending December 31, 2020.

These unaudited condensed consolidated financial

statements should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto for

the year ended December 31, 2019.

generally accepted accounting principles has been condensed or omitted in accordance

with rules and regulations of the SEC.

Operating results for the three months ended March 31, 2021 are not necessarily indicative

of the results that may be expected for any future period or for the year ending December 31, 2021.

unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial

statements and the notes thereto for the year ended December 31, 20 20.

The preparation of the unaudited condensed consolidated

financial statements requires management to make estimates and assumptions relating to reporting of the assets and liabilities

and the disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements and the reported

amounts of revenues and expenses during the reporting period in conformity with U.S.

financial statements requires management to make estimates and assumptions relating to reporting of the assets and liabilities and the

disclosure of contingent assets and liabilities to prepare these condensed consolidated financial statements and the reported amounts

of revenues and expenses during the reporting period in conformity with U.S.

generally accepted accounting principles.

Actual results could differ from these estimates.

Certain prior year amounts have been reclassified

for consistency with the current year presentation.

These reclassifications had no effect on the previously reported net loss.

The Company believes that its existing capital resources,

together with interest thereon, will be sufficient to meet its projected operating requirements through at least September 30,

2021 which includes an on-going clinical study for LPCN 1144, compliance with regulatory requirements and on-going litigation

The Company has based this estimate on assumptions that may prove to be wrong, and the Company could utilize its available

capital resources sooner than it currently expects if additional activities are performed by the Company including pre-commercial

and commercial activities for TLANDO and new clinical studies for LPCN 1144, TLANDO XR and LPCN 1148 .While the Company believes

it has sufficient liquidity and capital resources to fund our projected operating requirements through at least September 30,

2021, the Company will need to raise additional capital at some point through the equity or debt markets or through out-licensing

activities, before or after September 30, 2021, to support its operations.

If the Company is unsuccessful in raising additional

capital, its ability to continue as a going concern will become a risk.

Further, the Company’s operating plan may change,

and the Company may need additional funds to meet operational needs and capital requirements for product development, regulatory

compliance and clinical trial activities sooner than planned.

In addition, the Company’s capital

resources may be consumed more rapidly if it pursues additional clinical studies for LPCN 1144, TLANDO XR and LPCN 1148.

the Company’s capital resources could last longer if it reduces expenses, reduces the number of activities currently contemplated

under our operating plan, if it terminates, modifies the design or suspends on-going clinical studies, or if it terminates or

settles any on-going litigation activities.

Actual results

could differ from these estimates.

Company believe s that its existing capital resources, together with interest thereon, will be sufficient to meet its projected

operating requirements through at least March 31, 2022 which includes an on-going clinical study for LPCN 1144, compliance with regulatory

requirements and on-going litigation activities.

The Company has based this estimate on assumptions that may prove to be wrong, and the

Company could utilize its available capital resources sooner than it currently expects if additional activities are performed by the Company

including pre-commercial and commercial activities for TLANDO and new clinical studies for LPCN 1144, TLANDO XR and LPCN 1148 .While the

Company believes it has sufficient liquidity and capital resources to fund our projected operating requirements through at least March 31,

2022, the Company will need to raise additional capital at some point through the equity or debt markets or through out-licensing activities,

before or after March 31, 2022, to support its operations.

If the Company is unsuccessful in raising additional capital, its ability

to continue as a going concern will become a risk.

Further, the Company’s operating plan may change, and the Company may need additional

funds to meet operational needs and capital requirements for product development, regulatory compliance and clinical trial activities

sooner than planned.

In addition, the Company’s capital resources may be consumed more rapidly if it pursues additional clinical

studies for LPCN 1144, TLANDO XR and LPCN 1148.

Conversely, the Company’s capital resources could last longer if it reduces expenses,

reduces the number of activities currently contemplated under our operating plan, if it terminates, modifies the design or suspends on-going

clinical studies, or if it terminates or settles any on-going litigation activities.

( 2) Earnings (Loss) per Share

Basic earnings (loss) per share is calculated by

dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during

Diluted earnings (loss) per share is based on the weighted average number of common shares outstanding plus, where

applicable, the additional potential common shares that would have been outstanding related to dilutive options, warrants and,

unvested restricted stock units to the extent such shares are dilutive.

The following table sets forth the computation of

basic and diluted earnings (loss) per share of common stock for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Nine Months Ended September 30,

earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted average number

of common shares outstanding during the period.

Diluted earnings (loss) per share is based on the weighted average number of common shares

outstanding plus, where applicable, the additional potential common shares that would have been outstanding related to dilutive options ,

warrants and, unvested restricted stock units to the extent such shares are dilutive.

following table sets forth the computation of basic and diluted earnings (loss) per share of common stock for the three months ended March 31,

2021 and 2020:

Three Months Ended March 31,

Basic loss per share attributable to common stock:

1 unchanged sentence

$ (5,770,651 )

$ (16,453,543 )

$ (9,715,269 )

Weighted avg.

common shares outstanding

Basic loss per share

attributable to common stock

Basic loss per share attributable to common stock

Diluted loss per share attributable to common stock:

1 unchanged sentence

$ (5,770,651 )

$ (16,453,543 )

$ (9,715,269 )

Weighted avg.

1 unchanged sentence

Diluted loss per share attributable to common stock

The computation of diluted loss per share for the

nine months ended September 30, 2020 and 2019 does not include the following stock options and warrants to purchase shares or unvested

restricted stock units in the computation of diluted loss per share because these instruments were antidilutive:

September 30,

computation of diluted loss per share for the three months ended March 31, 2021 and 2020 does not include the following stock

options and warrants to purchase shares or unvested restricted stock units in the computation of diluted loss per share because these

instruments were antidilutive:

Stock options

Unvested restricted stock units

Marketable Investment Securities

The Company has classified its marketable investment

securities as available-for-sale securities, all of which are debt securities.

These securities are carried at fair value with

unrealized holding gains and losses, net of the related tax effect, included in accumulated other comprehensive income (loss) in

stockholders’ equity until realized.

Gains and losses on investment security transactions are reported on the specific-identification

Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis.

The amortized

cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major

security type and class of security at September 30, 2020 and December 31, 2019 were as follows:

September 30, 2020

Government treasury bills

(3) Marketable

Investment Securities

The Company has classified its marketable investment securities

as available-for-sale securities, all of which are debt securities.

These securities are carried at fair value with unrealized holding

gains and losses, net of the related tax effect, included in accumulated other comprehensive income (loss) in stockholders’

until realized.

Gains and losses on investment security transactions are reported on the specific-identification method.

Dividend income

is recognized on the ex-dividend date and interest income is recognized on an accrual basis.

The amortized cost, gross unrealized holding

gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of security

at March 31, 2021 and December 31, 2020 were as follows:

March 31, 2021

Amortized Cost

Corporate bonds, notes and commercial paper

December 31, 2020

Corporate bonds, notes and commercial paper

Maturities of debt securities

classified as available-for-sale securities at September 30, 2020 are as follows:

September 30, 2020

Commercial paper

Maturities of debt securities classified

as available-for-sale securities at March 31, 2021 are as follows:

March 31, 2021

Due within one year

Due after one year through two years

There were no sales of marketable investment securities

during the three and nine months ended September 31, 2020 and 2019 and therefore no realized gains or losses.

Additionally, $450,000

and $8.5 million of marketable investment securities matured during the three months ended September 30, 2020 and September 30,

2019, respectively, and $4.8 million and $17.5 million of marketable investment securities matured during the nine months ended

September 30, 2020 and 2019, respectively.

The Company determined there were no other-than-temporary impairments for the three

and nine months ended September 30, 2020 and 2019.

during the three months ended March 31, 2021 and 2020 and therefore no realized gains or losses.

Additionally, $450,000 and $4.4

million of marketable investment securities matured during the three months ended March 31, 2021 and 2020, respectively.

determined there were no other-than-temporary impairments for the three months ended March 31, 2021 and 2020.

( 4) Fair Value

1 unchanged sentence

the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

The Company determines fair value

based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous

When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes

between observable and unobservable inputs, which are categorized in one of the following levels:

The Company determines fair value based

on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market.

considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable

and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs:

4 unchanged sentences

Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

All of the Company’s financial instruments

are valued using quoted prices in active markets or based on other observable inputs.

For accrued interest income, prepaid and

other current assets, accounts payable, and accrued expenses, the carrying amounts approximate fair value because of the short

maturity of these instruments.

The following table presents the placement in the fair value hierarchy of assets and liabilities

that are measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019:

September 30,

All of the Company’s financial instruments are valued

using quoted prices in active markets or based on other observable inputs.

For accrued interest income, prepaid and other current assets,

accounts payable, and accrued expenses, the carrying amounts approximate fair value because of the short maturity of these instruments.

The following table presents the placement in the fair value hierarchy of assets and liabilities that are measured at fair value on a

recurring basis at March 31, 2021 and December 31, 2020:

Fair value measurements at reporting date using

2 unchanged sentences

Level 3 inputs

Cash equivalents - money market funds and commercial paper

Government treasury bills

Corporate bonds, notes and commercial paper

Cash equivalents - money market funds

Commercial paper

Corporate bonds and notes

Warrant liability

value measurements at reporting date using

equivalents - money market funds and commercial paper

bonds, notes and commercial paper

The following methods and assumptions were used to

determine the fair value of each class of assets and liabilities recorded at fair value in the balance sheets:

Fair value measurements at reporting date using

December 31, 2020

Level 1 inputs

Level 2 inputs

Level 3 inputs

Cash equivalents - money market funds

Commercial paper

Warrant liability

The following methods and assumptions were used to determine

the fair value of each class of assets and liabilities recorded at fair value in the balance sheets:

Cash equivalents:

Cash equivalents primarily consist

of highly-rated money market funds, commercial paper and treasury bills with original maturities to the Company of three months

or less and are purchased daily at par value with specified yield rates.

Cash equivalents related to money market funds and treasury

bills are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices or broker or

dealer quotations for similar assets.

Cash equivalents related to commercial paper are classified within Level 2 of the fair value

hierarchy because they are valued using broker/dealer quotes, bids and offers, benchmark yields and credit spreads and other observable

Government treasury bills:

The Company uses a third-party

pricing service to value these investments.

United States treasury bills are classified within Level 1 of the fair value hierarchy

because they are valued using quoted market prices in active markets for identical assets and reportable trades.

Cash equivalents primarily consist of

highly-rated money market funds and treasury bills with original maturities to the Company of three months or less and are purchased daily

at par value with specified yield rates.

Cash equivalents related to money market funds and treasury bills are classified within Level

1 of the fair value hierarchy because they are valued using quoted market prices or broker or dealer quotations for similar assets.

Corporate bonds, notes, and commercial paper:

Company uses a third-party pricing service to value these investments.

Corporate bonds, notes and commercial paper are classified

within Level 2 of the fair value hierarchy because they are valued using broker/dealer quotes, bids and offers, benchmark yields

and credit spreads and other observable inputs.

Warrant liability:

warrant liability (which relates to warrants to purchase shares of common stock) is marked-to-market each reporting period with

the change in fair value recorded to other income (expense) in the accompanying statements of operations until the warrants are

exercised, expire or other facts and circumstances lead the warrant liability to be reclassified to stockholders’ equity.

uses a third-party pricing service to value these investments.

Corporate bonds, notes and commercial paper are classified within Level

2 of the fair value hierarchy because they are valued using broker/dealer quotes, bids and offers, benchmark yields and credit spreads

and other observable inputs.

The warrant liability (which relates to warrants to purchase shares of common

stock) is marked-to-market each reporting period with the change in fair value recorded to other income (expense) in the accompanying

statements of operations until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified

to stockholders’

The fair value of the warrant liability is estimated using a Black-Scholes option-pricing model.

The significant assumptions used

in preparing the option pricing model for valuing the warrant liability as of September 30, 2020, include (i) volatility of 103.45%,

(ii) risk free interest rate of 0.22%, (iii) strike price of $0.50, (iv) fair value of common stock of

$1.41, and (v) expected life of 4.13 years.

The significant assumptions used in preparing the option pricing model

for valuing the warrant liability as of December 31, 2019, include (i) volatility of 225.93%, (ii) risk

free interest rate of 1.69%, (iii) strike price of $0.50, (iv) fair value of common stock of $0.385, and

(v) expected life of 4.9 years.

The Company’s accounting policy is to recognize

transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer.

There were no transfers into or out of Level 1, Level 2, or Level 3 for the three and nine months ended September 30, 2020.

The significant

assumptions used in preparing the option pricing model for valuing the warrant liability as of March 31, 2021, include (i) volatility

of 95.44%, (ii) risk free interest rate of 0.63%, (iii) strike price of $0.50, (iv) fair value of common

stock of $1.51, and (v) expected life of 3.6 years.

The significant assumptions used in preparing the option pricing

model for valuing the warrant liability as of December 31, 2020, include (i) volatility of 88.46%, (ii) risk

free interest rate of 0.27%, (iii) strike price of $0.50, (iv) fair value of common stock of $1.36, and (v) expected

life of 3.9 years.

The Company’s accounting policy is to recognize transfers

between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer.

There were no

transfers into or out of Level 1, Level 2, or Level 3 for the three months ended March 31, 2021.

(5) Loan and Security Agreements

Silicon Valley Bank Loan

On January 5, 2018, the Company entered into a

Loan and Security Agreement (the “Loan and Security Agreement”) with Silicon Valley Bank (“SVB”) pursuant

to which SVB agreed to lend the Company $10.0 million.

The principal borrowed under the Loan and Security Agreement bears interest

at a rate equal to the Prime Rate, as reported in the money rates section of The Wall Street Journal or any successor publication

representing the rate of interest per annum then in effect, plus one percent per annum (4.25% as of September 30, 2020), which

interest is payable monthly.

Additionally on April 1, 2020, the Company and SVB entered into a Deferral Agreement.

Under the Deferral

Agreement, principal repayments are deferred by six months and the Company is only required to make monthly interest payments.

On January 5, 2018, the Company entered into a Loan

and Security Agreement (the “Loan and Security Agreement”) with Silicon Valley Bank (“SVB”) pursuant to which

SVB agreed to lend the Company $10.0 million.

The principal borrowed under the Loan and Security Agreement bears interest at a rate equal

to the Prime Rate, as reported in the money rates section of The Wall Street Journal or any successor publication representing the rate

of interest per annum then in effect, plus one percent per annum (4.25% as of March 31, 2021), which interest is payable monthly.

Additionally on April 1, 2020, the Company entered into a Deferral Agreement with SVB.

Under the Deferral Agreement, principal repayments

were deferred by six months and the Company was only required to make monthly interest payments.

The loan matures on June 1, 2022.

Previously, the Company only made monthly interest payments until December 31, 2018, following

which the Company also made equal monthly payments of principal and interest until the signing of the Deferral Agreement.

Company will also be required to pay an additional final payment at maturity equal to $650,000 (the “Final Payment Charge”).

The Final Payment Charge will be due on the scheduled maturity date and to date approximately $568,000 has been recognized as

an increase to the principal balance with a corresponding charge to interest expense with the remaining final payment charge to

be recognized over the term of the facility using the effective interest method.

At its option, the Company may prepay all amounts

owed under the Loan and Security Agreement (including all accrued and unpaid interest and the Final Payment Charge).

In connection with the Loan and Security Agreement,

the Company granted to SVB a security interest in substantially all of the Company’s assets now owned or hereafter acquired,

excluding intellectual property and certain other assets.

In addition, as TLANDO was not approved by the United States Food and

Drug Administration (“FDA”) prior to May 31, 2018, the Company maintains $5.0 million of cash collateral at SVB as

required under the Loan and Security Agreement until such time as TLANDO is approved by the FDA.

While any amounts are outstanding under the Loan

and Security Agreement, the Company is subject to a number of affirmative and negative covenants, including covenants regarding

dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates,

among other customary covenants.

The credit facility also includes events of default, the occurrence and continuation of which

could cause interest to be charged at the rate that is otherwise applicable plus 5.0% and would provide SVB, as collateral agent,

with the right to exercise remedies against the Company and the collateral securing the credit facility, including foreclosure

against the property securing the credit facilities, including its cash.

These events of default include, among other things, any

failure by the Company to pay principal or interest due under the credit facility, a breach of certain covenants under the credit

facility, the Company’s insolvency, a material adverse change, and one or more judgments against the Company in an amount

greater than $100,000 individually or in the aggregate.

Future maturities of principal payments on the Loan

and Security Agreement at September 30, 2020, are as follows:

Years Ending December 31,

(in thousands)

The following table provides a reconciliation of

cash, cash equivalents, and restricted cash reported within the consolidated balance sheet that sum to the total of the same such

amounts shown in the statement of cash flows.

September 30,

Cash and cash equivalents

Restricted cash

Cash, cash equivalents, and restricted cash shown in the statement of cash flows

Amounts included in restricted cash represent those

required to be set aside by the Loan and Security Agreement.

The restriction will lapse if and when TLANDO is approved by the

Payroll Protection Program Loan

On April 21, 2020, the Company was

granted a loan from SVB in the aggregate amount of $233,537, pursuant to the Paycheck Protection Program (the “PPP”)

under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP loan, which was in the form

of a note dated April 21, 2020 issued by SVB, matures on April 21, 2022 and bears interest at a rate of 1.0% per annum, payable

monthly commencing on November 21, 2020 (“Note”).

The Note may be prepaid by the Company at any time prior to maturity

with no prepayment penalties.

Funds from the PPP loan may only be used for payroll costs, costs used to continue group health care

benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020.

intends to use the entire PPP loan amount for qualifying expenses.

Under the terms of the PPP loan, certain amounts of the PPP

loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

The Company has requested forgiveness

of the PPP loan and is awaiting a final decision from the Small Business Administration.

Future maturities of principal payments on the PPP

Loan at September 30, 2020, are as follows:

Previously, the Company only made monthly interest payments until December 31, 2018, following which the Company also made equal

monthly payments of principal and interest until the signing of the Deferral Agreement.

The Company will also be required to pay an additional

final payment at maturity equal to $650,000 (the “Final Payment Charge”).

The Final Payment Charge will be due on the scheduled

maturity date and to date approximately $609,000 has been recognized as an increase to the principal balance with a corresponding charge

to interest expense with the remaining final payment charge to be recognized over the term of the facility using the effective interest

At its option, the Company may prepay all amounts owed under the Loan and Security Agreement (including all accrued and unpaid

interest and the Final Payment Charge).

In connection with the Loan and Security Agreement, the

Company granted to SVB a security interest in substantially all of the Company’s assets now owned or hereafter acquired, excluding

intellectual property and certain other assets.

In addition, as TLANDO was not approved by the United States Food and Drug Administration

(“FDA”) prior to May 31, 2018, the Company maintained $5.0 million of cash collateral at SVB as required under the Loan

and Security Agreement until such time as TLANDO is approved by the FDA.

However on February 16, 2021, the Company amended the Loan

and Security Agreement with SVB to, among other things, remove the financial trigger and financial trigger release event provisions requiring

the Company to maintain a minimum cash collateral value and collateral pledge thereof.

While any amounts are outstanding under the Loan and Security

Agreement, the Company is subject to a number of affirmative and negative covenants, including covenants regarding dispositions of property,

business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants.

The credit facility also includes events of default, the occurrence and continuation of which could cause interest to be charged at the

rate that is otherwise applicable plus 5.0% and would provide SVB, as collateral agent, with the right to exercise remedies against the

Company and the collateral securing the credit facility, including foreclosure against the property securing the credit facilities, including

These events of default include, among other things, any failure by the Company to pay principal or interest due under the credit

facility, a breach of certain covenants under the credit facility, the Company’s insolvency, a material adverse change, and one

or more judgments against the Company in an amount greater than $100,000 individually or in the aggregate.

Future maturities of principal payments on the Loan and

Security Agreement at March 31, 2021, are as follows:

Years Ending December 31,

(in thousands)

Effective June 15, 2020, the Company began deferring

Federal Insurance Contributions Act (“FICA”) taxes under the CARES Act Section 2302.

Payment of these tax deferrals

are delayed to December 31, 2021 and December 31, 2022.

June 15, 2020 and through December 31, 2020, the Company deferred Federal Insurance Contributions Act (“FICA”) taxes

under the CARES Act Section 2302.

Payment of these tax deferrals are delayed to December 31, 2021 and December 31, 2022.

As of March 31, 2021 the tax deferrals totaled $36,000 and are included in accrued liabilities.

( 6) Income Taxes

The tax provision for interim periods is determined

using an estimate of the Company’s effective tax rate for the full year adjusted for discrete items, if any, that are taken

into account in the relevant period.

Each quarter the Company updates its estimate of the annual effective tax rate, and if the

estimated tax rate changes, the Company makes a cumulative adjustment.

At September 30, 2020 and December 31, 2019,

the Company had a full valuation allowance against its deferred tax assets, net of expected reversals of existing deferred tax

liabilities, as it believes it is more likely than not that these benefits will not be realized.

The tax provision for interim periods is determined using

an estimate of the Company’s effective tax rate for the full year adjusted for discrete items, if any, that are taken into account

in the relevant period.

Each quarter the Company updates its estimate of the annual effective tax rate, and if the estimated tax rate

changes, the Company makes a cumulative adjustment.

March 31, 2021 and December 31, 2020, the Company had a full valuation allowance against its deferred tax assets, net

of expected reversals of existing deferred tax liabilities, as it believes it is more likely than not that these benefits will not be

( 7) Contractual Agreements

(a) Abbott Products, Inc.

On March 29, 2012, the Company terminated its collaborative

agreement with Solvay Pharmaceuticals, Inc.

(later acquired by Abbott Products, Inc.) for TLANDO.

As part of the termination, the

Company reacquired the rights to the intellectual property from Abbott.

All obligations under the prior license agreement have

been completed except that Lipocine will owe Abbott a perpetual 1% royalty on net sales.

Such royalties are limited to $1.0 million

in the first two calendar years following product launch, after which period there is not a cap on royalties and no maximum aggregate

If generic versions of any such product are introduced, then royalties are reduced by 50%.

The Company did not incur any

royalties during the three and nine months ended September 30, 2020 and 2019.

March 29, 2012, the Company terminated its collaborative agreement with Solvay Pharmaceuticals, Inc.

(later acquired

by Abbott Products, Inc.) for TLANDO.

As part of the termination, the Company reacquired the rights to the intellectual property

All obligations under the prior license agreement have been completed except that Lipocine will owe Abbott a perpetual 1%

royalty on net sales.

Such royalties are limited to $1.0 million in the first two calendar years following product launch, after which

period there is not a cap on royalties and no maximum aggregate amount.

If generic versions of any such product are introduced, then royalties

are reduced by 50%.

The Company did not incur any royalties during the three months ended March 31, 2021 and 2020.

( b) Contract Research and Development

The Company has entered into agreements with

various contract organizations that conduct preclinical, clinical, analytical and manufacturing development work on behalf of

the Company as well as a number of independent contractors and primarily clinical researchers who serve as advisors to the

The Company incurred expenses of $1.8 million and $1.2 million, respectively, for the three months ended September

30, 2020 and 2019 and $5.1 million and $4.0 million, respectively, for the nine months ended

September 30, 2020 and 2019 under these agreements and has recorded these expenses in research and development

On August 6, 2004, the Company assumed a non-cancelable

operating lease for office space and laboratory facilities in Salt Lake City, Utah.

On May 6, 2014, the Company modified and extended

the lease through February 28, 2018.

On February 8, 2018, the Company extended the lease through February 28, 2019, on January

2, 2019, the Company extended the lease through February 29, 2020, and on February 24, 2020, the Company extended the lease through

February 28, 2021.

Future minimum lease payments under non-cancelable

operating leases as of September 30, 2020 are:

Company has entered into agreements with various contract organizations that conduct preclinical, clinical, analytical and manufacturing

development work on behalf of the Company as well as a number of independent contractors and primarily clinical researchers who

serve as advisors to the Company.

The Company incurred expenses of $837,000 and $1.9 million, respectively, for the three months ended

March 31, 2021 and 2020 under these agreements and has recorded these expenses in research and development expenses.

August 6, 2004, the Company assumed a non-cancelable operating lease for office space and laboratory facilities in Salt Lake City,

On May 6, 2014, the Company modified and extended the lease through February 28, 2018 .

On February 8, 2018,

the Company extended the lease through February 28, 2019, on January 2, 2019, the Company extended the lease through February 29,

2020, on February 24, 2020, the Company extended the lease through February 28, 2021 and on March 3, 2021, the Company

extended the lease through February 28, 2022.

minimum lease payments under non -cancelable operating leases as of March 31, 2021 are:

Year ending December 31:

Total minimum lease payments

The Company’s rent expense

was $83,000 for each of the three months ended September 30, 2020 and 2019 and was $248,000 and $246,000, respectively, for the

nine months ended September 30, 2020 and 2019.

(9) Stockholders’ Equity

The Company’s rent expense was

$83,000 for each of the three months ended March 31, 2021 and 2020.

( 9) Stockholders’

( a) Issuance of Common Stock

On January 28, 2021, the Company completed a public

offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended (“January 2021

Offering”).

The gross proceeds from the January 2021 Offering were approximately $28.7 million, before deducting underwriter

fees and other offering expenses of $1.9 million.

In the January 2021 Offering, the Company sold 16,428,571 shares of its common

On February 27, 2020, the Company completed a registered

direct offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933,

as amended (“February 2020 Offering”).

direct offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended

(“February 2020 Offering”).

The gross proceeds from the February 2020 Offering were approximately $6.0 million,

before deducting placement agent fees and other offering expenses of approximately $347,000.

In the February 2020 Offering, the

Company sold 10,084,034 Class A Units at an offering price of $0.595 per unit, with each Class A Unit consisting of one share of

its common stock and one-half of a common warrant to purchase one share of common stock at an exercise price of $0.53 per share

of common stock.

Additionally, the common stock warrants were immediately exercisable and expire on February 27, 2025.

terms, however, the common stock warrants cannot be exercised at any time that the common stock warrant holder would beneficially

own, after such exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding

after giving effect to such exercise.

On November 18, 2019, the Company completed a public

offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended

(“November 2019 Offering”).

The gross proceeds from the November 2019 Offering were approximately $6.0 million, before

deducting placement agent fees and other offering expenses of $404,000.

In the November 2019 Offering, the Company sold (i) 10,450,000

Class A Units, with each Class A Unit consisting of one share of its common stock and a common warrant to purchase one share of

its common stock, and (ii) 1,550,000 Class B Units, with each Class B Unit consisting of one pre-funded warrant to purchase one

share of its common stock and a common warrant to purchase one share of its common stock, at a price of $0.50 per Class A Unit

and $0.4999 per Class B Unit.

The pre-funded warrants, which were exercised for common stock in December 2019, were issued in lieu

of common stock in order to ensure the purchaser did not exceed certain beneficial ownership limitations.

The pre-funded warrants

were immediately exercisable at an exercise price of $.0001 per share, subject to adjustment.

Additionally, the common stock warrants

were immediately exercisable at an exercise price of $0.50 per share, subject to adjustment, and expire on November 17, 2024.

their terms, however, neither the pre-funded warrants nor the common stock warrants can be exercised at any time that the pre-funded

warrant holder or the common stock warrant holder would beneficially own, after such exercise, more than 4.99% (or, at the election

of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to such exercise.

On the date of

the November 2019 Offering, the Company allocated approximately $768,000 and $4.8 million to common stock/additional paid-in capital

and warrant liability, respectively.

In March 2017, the Company entered into a

Controlled Equity Offering Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

(“Cantor”), to sell shares of our common stock, with aggregate gross sales proceeds of up to $20.0 million, from

time to time, through an “at the market” (“ATM”), equity offering

program, under which Cantor acts as sales agent.

The shares of common stock to be sold under the Sales Agreement were

originally sold and issued pursuant to the Company’s Registration Statement on Form S-3 (File No.

333-199093) (the

“Prior Form S-3”), which was previously declared effective by the Securities and Exchange Commission, and the

related prospectus and one or more prospectus supplements.

On October 13, 2017, the Company filed a Form S-3 (File No.

333-220942) (the “New Form S-3”) to replace the Prior Form S-3.

The New Form S-3 has been declared

effective by the Securities and Exchange Commission, and the Prior Form S-3 has been terminated.

The New Form S-3

registered the sale of up to $150.0 million of any combination of common stock, preferred stock, debt securities, warrants

and units pursuant to a shelf registration statement.

The New Form S-3 also contains a prospectus pursuant to which we

may sell, from time to time, shares of our common stock having an aggregate offering price of up to $25.0 million through

Cantor as our sales agent, pursuant to the Sales Agreement.

On August 21, 2020, the Company filed a prospectus supplement in

which the Company increased the aggregate offering price in which shares of our common stock can be sold through Cantor as

our sales agent, pursuant to the Sales Agreement to a total of $63.0 million of which $13.0 million of our common stock has

already been sold under the Sales Agreement.

As of September 30, 2020, we had sold an aggregate

of 9,465,535 shares at a weighted-average sales price of $2.54 per share under the ATM for aggregate gross proceeds of $24.1 million

and net proceeds of $23.2 million, after deducting sales agent commission and discounts and our other offering costs.

three and nine months ended September 30, 2020, the Company sold 2,830,000 shares at a weighted-average sales price of $1.43 per

share under the ATM for aggregate gross proceeds of $4.0 million and net proceeds of $3.9 million.

During the three months ended

September 30, 2019, the Company sold an aggregate of 283,782 shares at a weighted-average sales price of $2.22 per share under

the ATM for aggregate gross proceeds of $629,000 and $604,000 in net proceeds.

During the nine months ended September 30, 2019,

the Company sold an aggregate of 3,276,286 shares at a weighted-average sales price of $2.19 per share under the ATM for aggregate

gross proceeds of $7.2 million and $6.9 million in net proceeds.

before deducting placement agent fees and other offering expenses of $347,000.

In the February 2020 Offering, the Company sold 10,084,034

Class A Units at an offering price of $0.595 per unit, with each Class A Unit consisting of one share of its common stock and

one-half of a common warrant to purchase one share of common stock at an exercise price of $0.53 per share of common stock.

Additionally,

the common stock warrants were immediately exercisable and expire on February 27, 2025.

By their terms, however, the common stock

warrants cannot be exercised at any time that the common stock warrant holder would beneficially own, after such exercise, more than 4.99%

(or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to such exercise.

On November 18, 2019, the

Company completed a public offering of securities registered under an effective registration statement filed pursuant to the

Securities Act of 1933, as amended (“November 2019 Offering”).

The gross proceeds from the November 2019

Offering were approximately $6.0 million, before deducting placement agent fees and other offering expenses of $404,000.

November 2019 Offering, the Company sold (i) 10,450,000 Class A Units, with each Class A Unit consisted of one

share of its common stock and a common warrant to purchase one share of its common stock, and (ii) 1,550,000 Class B

Units, with each Class B Unit consisting of one pre-funded warrant to purchase one share of its common stock and a common

warrant to purchase one share of its common stock, at a price of $0.50 per Class A Unit and $0.4999 per Class B Unit.

pre-funded warrants, which were exercised for common stock in December 2019, were issued in lieu of common stock in order to

ensure the purchaser did not exceed certain beneficial ownership limitations.

The pre-funded warrants were immediately exercisable

at an exercise price of $.0001 per share, subject to adjustment.

Additionally, the common stock warrants were immediately

exercisable at an exercise price of $0.50 per share, subject to adjustment, and expire on November 17, 2024.

By their terms,

however, neither the pre-funded warrants nor the common stock warrants can be exercised at any time that the pre-funded warrant

holder or the common stock warrant holder would beneficially own, after such exercise, more than 4.99% (or, at the election of the

holder, 9.99%) of the shares of common stock then outstanding after giving effect to such exercise.

On the date of the

November 2019 Offering, the Company allocated approximately $768,000 and $4.8 million to common stock/additional paid-in

capital and warrant liability, respectively.

On March 6, 2017, the Company entered into the Sales

Agreement with Cantor Fitzgerald & Co.

(“Cantor”) pursuant to which the Company may issue and sell, from time to

time, shares of its common stock having an aggregate offering price of up to the amount the Company registered on an effective registration

statement pursuant to which the offering is being made.

The Company currently has registered up to $50.0 million for sale under the Sales

Agreement, pursuant to the Registration Statement on Form S-3 (File No.

333-250072) through Cantor as the Company’s sales

Cantor may sell the Company’s common stock by any method permitted by law deemed to be an “at the market offering”

as defined in Rule 415(a)(4) of the Securities Act, including sales made directly on or through the Nasdaq Capital Market or

any other existing trade market for our common stock, in negotiated transactions at market prices prevailing at the time of sale or at

prices related to prevailing market prices, or any other method permitted by law.

Cantor uses its commercially reasonable efforts consistent

with its normal trading and sales practices and applicable law and regulations to sell these shares.

The Company pays Cantor 3.0% of the

aggregate gross proceeds from each sale of shares under the Sales Agreement.

In addition, the Company has also provided Cantor with customary

indemnification rights.

The shares of the Company’s common stock sold under

the Sales Agreement are sold and issued pursuant to the Registration Statement on Form S-3 (File No.

333-250072) (the “Form S-3”),

which was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus

The Company is not obligated to make any sales of its common

stock under the Sales Agreement.

The offering of common stock pursuant to the Sales Agreement will terminate upon the termination of the

Sales Agreement as permitted therein.

The Company and Cantor may each terminate the Sales Agreement at any time upon ten days’

of March 31, 2021, we had sold an aggregate of 15,023,073 shares at a weighted-average sales price of $2.19 per share under

the ATM for aggregate gross proceeds of $32.9 million and net proceeds of $31.7 million, after deducting sales agent commission and discounts

and our other offering costs.

During the three months ended March 31, 2021, the Company sold 1,811,238 shares of our common stock

pursuant to the current Registration Statement on Form S-3 (File No.

333-250072) at a weighted-average sales price of $1.95

per share, resulting in net proceeds of approximately $3.4 million under the Sales Agreement which is net of $112,000 in expenses.

the three months ended March 31, 2020, the Company did not sell any shares of our common stock pursuant to the prior Registration

Statement on Form S-3 (File No.

As of March 31, 2021, the Company had $41.2 million available for sale under

the Sales Agreement.

(b) Rights Agreement

1 unchanged sentence

Transfer & Trust Company, LLC, as Rights Agent, entered into a Rights Agreement.

Also on November 12, 2015, the board of directors

of the Company authorized and the Company declared a dividend of one preferred stock purchase right (each a “Right”

and collectively, the “Rights”) for each outstanding share of common stock of the Company.

The dividend was payable

to stockholders of record as of the close of business on November 30, 2015 and entitles the registered holder to purchase from

the Company one one-thousandth of a fully paid non-assessable share of Series A Junior Participating Preferred Stock of the Company

at a price of $63.96 per one-thousandth share (the “Purchase Price”).

The Rights will generally become exercisable

upon the earlier to occur of (i) 10 business days following a public announcement that a person or group of affiliated or associated

persons has become an Acquiring Person (as defined below) or (ii) 10 business days (or such later date as may be determined by

action of the board of directors prior to such time as any person or group of affiliated or associated persons becomes an Acquiring

Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation

of which would result in the beneficial ownership by a person or group of 15% or more of the outstanding common stock of the Company.

Except in certain situations, a person or group of affiliated or associated persons becomes an “Acquiring Person” upon

acquiring beneficial ownership of 15% or more of the outstanding shares of common stock of the Company.

In general, in the event a person becomes an Acquiring

Person, then each Right not owned by such Acquiring Person will entitle its holder to purchase from the Company, at the Right’s

then current exercise price, in lieu of shares of Series A Junior Participating Preferred Stock, common stock of the Company with

a market value of twice the Purchase Price.

In addition, if after any person has become an Acquiring Person, (a) the Company is

acquired in a merger or other business combination, or (b) 50% or more of the Company’s assets, or assets accounting for

50% or more of its earning power, are sold, leased, exchanged or otherwise transferred (in one or more transactions), proper provision

shall be made so that each holder of a Right (other than the Acquiring Person, its affiliates and associates and certain transferees

thereof, whose Rights became void) shall thereafter have the right to purchase from the acquiring corporation, for the Purchase

Price, that number of shares of common stock of the acquiring corporation which at the time of such transaction would have a market

value of twice the Purchase Price.

The Company will be entitled to redeem the

Rights at $0.001 per Right at any time prior to the time an Acquiring Person becomes such.

The terms of the Rights are set

forth in the Rights Agreement, which is summarized in the Company's Current Report on Form 8-K dated November 13, 2015.

rights plan was originally set to expire on November 12, 2018;

however, on November 5, 2018 our Board of Directors approved

an Amended and Restated Rights Agreement pursuant to which the expiration date was extended to November 5, 2021, unless the

rights are earlier redeemed or exchanged by the Company.

Also on November 12, 2015, the board of

directors of the Company authorized and the Company declared a dividend of one preferred stock purchase right (each a “Right”

and collectively, the “Rights”) for each outstanding share of common stock of the Company.

The dividend was payable to stockholders

of record as of the close of business on November 30, 2015 and entitles the registered holder to purchase from the Company one one-thousandth

of a fully paid non-assessable share of Series A Junior Participating Preferred Stock of the Company at a price of $63.96 per one-thousandth

share (the “Purchase Price”).

The Rights will generally become exercisable upon the earlier to occur of (i) 10 business

days following a public announcement that a person or group of affiliated or associated persons has become an Acquiring Person (as defined

below) or (ii) 10 business days (or such later date as may be determined by action of the board of directors prior to such time as

any person or group of affiliated or associated persons becomes an Acquiring Person) following the commencement of, or announcement of

an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person

or group of 15% or more of the outstanding common stock of the Company.

Except in certain situations, a person or group of affiliated

or associated persons becomes an “Acquiring Person”

upon acquiring beneficial ownership of 15% or more of the outstanding

shares of common stock of the Company.

general, in the event a person becomes an Acquiring Person, then each Right not owned by such Acquiring Person will entitle its holder

to purchase from the Company, at the Right’s then current exercise price, in lieu of shares of Series A Junior Participating

Preferred Stock, common stock of the Company with a market value of twice the Purchase Price.

In addition, if after any person

has become an Acquiring Person, (a) the Company is acquired in a merger or other business combination, or (b) 50% or more of

the Company’s assets, or assets accounting for 50% or more of its earning power, are sold, leased, exchanged or otherwise transferred

(in one or more transactions), proper provision shall be made so that each holder of a Right (other than the Acquiring Person, its affiliates

and associates and certain transferees thereof, whose Rights became void) shall thereafter have the right to purchase from the acquiring

corporation, for the Purchase Price, that number of shares of common stock of the acquiring corporation which at the time of such transaction

would have a market value of twice the Purchase Price.

The Company will be entitled to redeem the Rights at $0.001

per Right at any time prior to the time an Acquiring Person becomes such.

The terms of the Rights are set forth in the Rights Agreement,

which is summarized in the Company's Current Report on Form 8-K dated November 13, 2015.

The rights plan was originally set

to expire on November 12, 2018;

however, on November 5, 2018 our Board of Directors approved an Amended and Restated Rights

Agreement pursuant to which the expiration date was extended to November 5, 2021, unless the rights are earlier redeemed or exchanged

by the Company.

The Company recognizes stock-based compensation

expense for grants of stock option awards, restricted stock units and restricted stock under the Company’s Incentive Plan

to employees and nonemployee members of the Company’s board of directors based on the grant-date fair value of those awards.

The grant-date fair value of an award is generally recognized as compensation expense over the award’s requisite service

In addition, the Company grants stock options to nonemployee consultants from time to time in exchange for services performed

for the Company.

The Company uses the Black-Scholes model to compute

the estimated fair value of stock option awards.

Using this model, fair value is calculated based on assumptions with respect to

(i) expected volatility of the Company’s common stock price, (ii) the periods of time over which employees and

members of the board of directors are expected to hold their options prior to exercise (expected term), (iii) expected dividend

yield on the Common Stock, and (iv) risk-free interest rates.

Stock-based compensation expense also includes an estimate,

which is made at the time of grant, of the number of awards that are expected to be forfeited.

This estimate is revised, if necessary,

in subsequent periods if actual forfeitures differ from those estimates.

Stock-based compensation cost that has been expensed in

the statements of operations amounted to approximately $352,000 and $58,000, respectively, for the three months ended September

30, 2020 and 2019 and amounted to $1.1 million and $781,000, respectively, for the nine months ended September 30, 2020 and 2019,

and is allocated as follows:

The Company recognizes stock-based compensation expense

for grants of stock option awards, restricted stock units and restricted stock under the Company’s Incentive Plan to employees,

nonemployees and nonemployee members of the Company’s board of directors based on the grant-date fair value of those awards.

grant-date fair value of an award is generally recognized as compensation expense over the award’s requisite service period.

addition, the Company has granted performance-based stock option awards and restricted stock units, which vest based upon the Company

satisfying certain performance conditions.

Potential compensation cost, measured on the grant date, related to these performance options

will be recognized only if, and when, the Company estimates that these options or units will vest, which is based on whether the Company

considers the performance conditions to be probable of attainment.

The Company’s estimates of the number of performance-based options

or units that will vest will be revised, if necessary, in subsequent periods.

Company uses the Black-Scholes model to compute the estimated fair value of stock option awards.

Using this model, fair value is calculated

based on assumptions with respect to (i) expected volatility of the Company’s common stock price, (ii) the periods of

time over which employees and members of the board of directors are expected to hold their options prior to exercise (expected term),

(iii) expected dividend yield on the Common Stock, and (iv) risk-free interest rates.

Stock-based compensation expense also

includes an estimate, which is made at the time of grant, of the number of awards that are expected to be forfeited.

This estimate is

revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Stock-based compensation cost that has

been expensed in the statements of operations amounted to approximately $148,000 and $322,000, respectively, for the three months

ended March 31, 2021 and 2020 and is allocated as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

General and administrative

The Company did not issue any stock options during

the three months ended September 30, 2020 and issued 24,000 stock options during the three months ended September 30, 2019.

Additionally,

during the nine months ended September 30, 2020 and 2019, the Company issued 739,000 and 79,000 stock options, respectively.

Key assumptions used in the determination of the

fair value of stock options granted are as follows:

Company issued 310,000 and 626,000 stock options, respectively, during the three months ended March 31, 2021 and 2020.

Key assumptions used in the determination of the fair value

of stock options granted are as follows:

The expected term represents the period that the stock-based awards are expected to be outstanding.

Due to limited historical

experience of similar awards, the expected term was estimated using the simplified method in accordance with the provisions of Staff Accounting

Bulletin (“SAB”) No.

107, Share-Based Payment, for awards with stated or implied service periods.

The simplified

method defines the expected term as the average of the contractual term and the vesting period of the stock option.

For awards with performance

conditions, and that have the contractual term to satisfy the performance condition, the contractual term was used.

Interest Rate :

The risk-free interest rate used was based on the implied yield currently available on U.S.

Treasury issues

with an equivalent remaining term.

The expected dividend assumption is based on management’s current expectation about the Company’s anticipated

dividend policy.

The Company does not anticipate declaring dividends in the foreseeable future.

The volatility factor is based solely on the Company’s trading history since March 2014.

options granted during the three months ended March 31, 2021 and 2020, the Company calculated the fair value of each option

grant on the respective dates of grant using the following weighted average assumptions:

Expected term

2 unchanged sentences

Expected volatility

Expected Term :

The expected term represents

the period that the stock-based awards are expected to be outstanding.

Due to limited historical experience of similar awards,

the expected term was estimated using the simplified method in accordance with the provisions of Staff Accounting Bulletin (“SAB”)

107, Share-Based Payment, for awards with stated or implied service periods.

The simplified method defines the

expected term as the average of the contractual term and the vesting period of the stock option.

For awards with performance conditions,

and that have the contractual term to satisfy the performance condition, the contractual term was used.

Risk-Free Interest Rate :

The risk-free interest

rate used was based on the implied yield currently available on U.S.

Treasury issues with an equivalent remaining term.

Expected Dividend :

The expected dividend

assumption is based on management’s current expectation about the Company’s anticipated dividend policy.

does not anticipate declaring dividends in the foreseeable future.

Expected Volatility :

The volatility factor

is based solely on the Company’s trading history since March 2014.

FASB ASC 718, Stock Compensation, requires

the Company to recognize compensation expense for the portion of options that are expected to vest.

Therefore, the Company applied

estimated forfeiture rates that were derived from historical employee termination behavior.

If the actual number of forfeitures

differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.

As of September 30, 2020, there was $430,000 of

total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company’s

stock option plan.

That cost is expected to be recognized over a weighted average period of 1.59 years and will be adjusted for

subsequent changes in estimated forfeitures.

Additionally, as of September 30, 2020, there was $118,000 of total unrecognized compensation

cost related to unvested restricted stock units that have either time-based or performance vesting.

ASC 718, Stock Compensation , requires the Company to recognize compensation expense for the portion of options that

are expected to vest.

Therefore, the Company applied estimated forfeiture rates that were derived from historical employee termination

If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense

may be required in future periods.

of March 31, 2021, there was $1.2 million of total unrecognized compensation cost related to unvested share-based compensation

arrangements granted under the Company’s stock option plan.

That cost is expected to be recognized over a weighted average period

of 2.45 years and will be adjusted for subsequent changes in estimated forfeitures.

(d) Stock Option Plan

1 unchanged sentence

Stock and Incentive Plan ("2014 Plan") subject to shareholder approval which was received in June 2014.

Plan provides for the granting of nonqualified and incentive stock options, stock appreciation rights, restricted stock units,

restricted stock and dividend equivalents.

The 2014 Plan provides

for the granting of nonqualified and incentive stock options, stock appreciation rights, restricted stock units, restricted stock and

dividend equivalents.

An aggregate of 1,000,000 shares were authorized for issuance under the 2014 Plan.

Additionally, 271,906 remaining

authorized shares under the 2011 Equity Incentive Plan ("2011 Plan") were issuable under the 2014 Plan at the time of the 2014

Plan adoption.

Upon receiving shareholder approval in June 2016, the 2014 Plan was amended and restated to increase the authorized

number of shares of common stock of the Company issuable under all awards granted under the 2014 Plan from 1,271,906 to 2,471,906.

Additionally,

271,906 remaining authorized shares under the 2011 Equity Incentive Plan ("2011 Plan") were issuable under the 2014 Plan

at the time of the 2014 Plan adoption.

Upon receiving shareholder approval in June 2016, the 2014 Plan was amended and restated

to increase the authorized number of shares of common stock of the Company issuable under all awards granted under the 2014 Plan

from 1,271,906 to 2,471,906.

Additionally, upon receiving shareholder approval in June 2018, the 2014 Plan was further amended

and restated to increase the authorized number of shares of common stock of the Company issuable under all awards granted under

the 2014 Plan from 2,471,906 to 3,221,906.

Finally, upon receiving shareholder approval in June 2020, the 2014 Plan was further

amended and restated to increase the authorized number of shares of common stock of the Company issuable under all awards granted

under the 2014 Plan from 3,221,906 to 5,721,906.

The board of directors, on an option-by-option basis, determines the number of

shares, exercise price, term, and vesting period for options granted.

upon receiving shareholder approval in June 2018, the 2014 Plan was further amended and restated to increase the authorized number

of shares of common stock of the Company issuable under all awards granted under the 2014 Plan from 2,471,906 to 3,221,906.

Finally, upon

receiving shareholder approval in June 2020, the 2014 Plan was further amended and restated to increase the authorized number of

shares of common stock of the Company issuable under all awards granted under the 2014 Plan from 3,221,906 to 5,721,906.

directors, on an option-by-option basis, determines the number of shares, exercise price, term, and vesting period for options granted.

Options granted generally have a ten-year contractual life.

The Company issues shares of common stock upon the exercise of options with the source of those shares of common stock being either

newly issued shares or shares held in treasury.

An aggregate of 5,721,906 shares are authorized for issuance under the 2014 Plan,

with 2,544,888 shares remaining available for grant as of September 30, 2020.

A summary of stock option activity is as follows:

The Company issues shares of common stock upon the exercise of options with

the source of those shares of common stock being either newly issued shares or shares held in treasury.

An aggregate of 5,721,906 shares

are authorized for issuance under the 2014 Plan, with 1,650,874 shares remaining available for grant as of March 31, 2021.

summary of stock option activity is as follows:

Outstanding stock options

Weighted average

exercise price

Weighted average exercise price

Balance at December 31, 2020

3 unchanged sentences

Options cancelled

Balance at September 30, 2020

Options exercisable at September 30, 2020

The following table summarizes information about

stock options outstanding and exercisable at September 30, 2020:

The intrinsic value for stock options is defined

as the difference between the current market value and the exercise price.

There were no stock options exercised during the three

and nine months ended September 30, 2020 and there were 20,000 stock options exercised during the three and nine months ended September

(e) Restricted Stock Units

A summary of restricted stock unit activity is as

unvested restricted

Balance at December 31, 2019

Balance at September 30, 2020

(f) Common Stock Warrants

The Company accounts for

its common stock warrants under ASC 480, Distinguishing Liabilities from Equity , which requires any financial instrument,

other than an outstanding share, that, at inception, embodies an obligation to repurchase the issuer’s equity shares, or

is indexed to such an obligation, and requires or may require the issuer to settle the obligation by transferring assets, to be

classified as a liability.

In accordance with ASC 480, the Company’s outstanding warrants from the November 2019 Offering

are classified as a liability.

The liability is adjusted to fair value at each reporting period, with the changes in fair value

recognized as gain (loss) on change in fair value of warranty liability in the Company’s consolidated statements of operations.

The warrants issued in the November 2019 Offering allow the warrant holder, if certain change in control events occur, the option

to receive an amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes option pricing

model with certain defined assumptions upon a fundamental transaction.

As of September 30, 2020,

the Company had 1,104,030 common stock warrants outstanding from the November 2019 Offering to purchase an equal number of shares

of common stock.

The fair value of these warrants on September 30, 2020 and December 31, 2019 was determined using the Black-Scholes

Balance at March 31, 2021

Options exercisable at March 31, 2021

following table summarizes information about stock options outstanding and exercisable at March 31, 2021:

Options outstanding

Options exercisable

Weighted average remaining contractual life

Weighted average exercise price

Aggregate intrinsic value

Number exercisable

Weighted average remaining contractual life

Weighted average exercise price

Aggregate intrinsic value

intrinsic value for stock options is defined as the difference between the current market value and the exercise price.

There were 4,584

stock options exercised during the three months ended March 31, 2021 and no stock options exercised during the three months ended

March 31, 2020.

( e) Common Stock Warrants

The Company accounts for its common

stock warrants under ASC 480, Distinguishing Liabilities from Equity , which requires any financial instrument, other than

an outstanding share, that, at inception, embodies an obligation to repurchase the issuer’s equity shares, or is indexed to such

an obligation, and requires or may require the issuer to settle the obligation by transferring assets, to be classified as a liability.

In accordance with ASC 480, the Company’s outstanding warrants from the November 2019 Offering are classified as a liability.

The liability is adjusted to fair value at each reporting period, with the changes in fair value recognized as gain (loss) on change in

fair value of warranty liability in the Company’s consolidated statements of operations.

The warrants issued in the November 2019

Offering allow the warrant holder, if certain change in control events occur, the option to receive an amount of cash equal to the value

of the warrants as determined in accordance with the Black-Scholes option pricing model with certain defined assumptions upon a fundamental

As of March 31, 2021, the

Company had 1,094,030 common stock warrants outstanding from the November 2019 Offering to purchase an equal number of shares of

common stock.

The fair value of these warrants on March 31, 2021 and on December 31, 2020 was determined using the Black-Scholes

option pricing model with the following Level 3 inputs (as defined in the November 2019 Offering):

September 30, 2020

December 31, 2019

Expected life in years

1 unchanged sentence

Dividend yield

During the three and nine

months ended September 30, 2020, the Company recorded a non-cash gain of approximately $140,000 and a non-cash loss of approximately

$3.0 million, respectively, from the change in fair value of the November 2019 Offering warrants.

The following table is a reconciliation

of the warrant liability measured at fair value using level 3 inputs:

During the three months ended March 31,

2021, the Company recorded a non-cash loss of approximately $195,000 from the change in fair value of the November 2019 Offering

During the three months ended March 31, 2020, the Company recorded a non-cash loss of approximately $1.1 million from the

change in fair value of the November 2019 Offering warrants.

The following table is a reconciliation of the warrant liability measured

at fair value using level 3 inputs:

Warrant Liability

Balance at December 31, 2020

Settlement of liabilty on warrant exercise

Settlement of liability on warrant exercise

Change in fair value of common stock warrants

Balance at September 30, 2020

Balance at March 31, 2021

Additionally, in the February 2020

2020 Offering, the Company issued 5,042,017 common stock warrants.

However, the February 2020 Offering warrants do not provide

the warrant holder the option to receive an amount of cash equal to the Black-Scholes value of the warrants upon a fundamental

Therefore, the Company has not recorded a warrant liability with respect to the warrants issued in the February 2020

Offering, the Company issued 5,042,017 common stock warrants, however, because these warrants do not provide the warrant holder the option

to put the warrant back to the Company, the warrants are classified as equity.

The following table summarizes

the number of common stock warrants outstanding and the weighted average exercise price:

Weighted Average

Exercise Price

Weighted Average Exercise Price

Outstanding at December 31, 2020

(15,097,651 )

Balance at September 30, 2020

During the three and nine months ended September

30, 2020, 1,478,844, and 15,097,651 common stock warrants to purchase one share of our common stock were exercised, respectively,

resulting in proceeds of approximately $761,000 and $7.7 million, respectively, in the three and nine months ended September 30,

The following table summarizes information about

common stock warrants outstanding at September 30, 2020:

Balance at March 31, 2021

During the three months ended March 31,

2021 and 2020, 10,000, and 121,000 common stock warrants to purchase one share of our common stock were exercised, respectively, resulting

in proceeds of approximately $5,000 and $61,000, respectively, in the three months ended March 31, 2021 and 2020.

following table summarizes information about common stock warrants outstanding at March 31, 2021:

Warrants outstanding

Number exercisable

Weighted average

Weighted average remaining

contractual life

Weighted average

exercise price

Aggregate intrinsic

Weighted average exercise price

Aggregate intrinsic value

(10 ) Commitments and Contingencies

The Company is involved in various lawsuits, claims

and other legal matters from time to time that arise in the ordinary course of conducting business.

The Company records a liability

when a particular contingency is probable and estimable.

On February 15, 2019, a

purported shareholder filed a shareholder derivative complaint in the Court of Chancery of the State of Delaware, John Wajda,

derivatively on behalf of Lipocine Inc.

Mahesh Patel, et al., against certain of the Company’s current and former

officers and directors as well as the Company as a nominal defendant.

The complaint asserts claims for alleged breaches of

fiduciary duty and unjust enrichment arising out of the Company’s dissemination of purportedly false and misleading statements

relating to the filing of the New Drug Application (“NDA”) for TLANDO.

The relief sought in the complaint includes

unspecified damages, changes to the Company’s corporate governance procedures, equitable and/or injunctive relief, restitution,

and attorneys’ fees.

On August 16, 2019, defendants filed a motion to dismiss the complaint.

In response, the plaintiff’s

filed an amended stockholder derivative complaint.

Defendants’ motion to dismiss the amended complaint was filed on December

plaintiff’s response was filed on January 27, 2020 and defendants’ reply was filed on February 26, 2020.

Oral arguments on the motion to dismiss were held on July 28, 2020.

On July 30, 2020, the court entered an order dismissing the

complaint in its entirety.

On April 2, 2019, the Company filed a lawsuit against

Clarus in the United States District Court for the District of Delaware alleging that Clarus’s JATENZO®

product infringes

six of Lipocine’s issued U.S.

The Company is involved in various lawsuits, claims and

other legal matters from time to time that arise in the ordinary course of conducting business.

The Company records a liability when a

particular contingency is probable and estimable.

April 2, 2019, the Company filed a lawsuit against Clarus in the United States District Court for the District of Delaware

alleging that Clarus’s JATENZO®

product infringes six of Lipocine’s issued U.S.

and 6,923,988.

Clarus has answered

the complaint and asserted counterclaims of non-infringement and invalidity.

The Company answered Clarus’s counterclaims

However on February 11, 2020, the Company voluntarily dismissed allegations of patent infringement

for expired U.S.

6,569,463 and 6,923,988 in an effort to streamline the issues and associated costs for dispute.

answered the complaint and asserted counterclaims of non-infringement and invalidity.

The Company answered Clarus’s counterclaims

on April 29, 2019.

The Court held a scheduling conference on August 15, 2019, a claim construction hearing on February 11,

and scheduled a five-day jury trial beginning on February 8, 2021.

On February 11, 2020, the Company voluntarily dismissed allegations

of patent infringement for expired U.S.

6,569,463 and 6,923,988 in an effort to streamline the issues and associated

costs for dispute.

The parties are currently engaged in the fact discovery and expert testimony phase of the lawsuit.

On November 14, 2019, the Company and certain of

its officers were named as defendants in a purported shareholder class action lawsuit, Solomon Abady v.

2020 and a Summary Judgement Hearing on January 15, 2021.

Originally the United States District Court for the District of Delaware

had scheduled a five-day jury trial to begin on February 8, 2021, however, on December 28, 2020, the District Court postponed

the jury trial due to the ongoing effects of the COVID-19 pandemic.

The jury trial will be rescheduled once it becomes clear when jury

trials will resume in the District of Delaware.

On November 14, 2019, the Company and certain of its

officers were named as defendants in a purported shareholder class action lawsuit, Solomon Abady v.

Lipocine Inc.

2:19-cv-00906-PMW, filed in the United District Court for the District of Utah.

The complaint alleges that the defendants made

false and/or misleading statements and/or failed to disclose that our filing of the NDA for TLANDO to the FDA contained deficiencies

and as a result the defendants’ statements about our business and operations were false and misleading and/or lacked a reasonable

basis in violation of federal securities laws.

The lawsuit seeks certification as a class action (for a purported class of purchasers

of the Company’s securities from March 27, 2019 through November 8, 2019), compensatory damages in an unspecified amount,

and unspecified equitable or injunctive relief.

The Company has insurance that covers claims of this nature.

The retention amount

payable by the Company under our policy is $1.25 million.

et al ., 2:19-cv-00906-PMW,

filed in the United District Court for the District of Utah.

The complaint alleges that the defendants made false and/or misleading statements

and/or failed to disclose that our filing of the NDA for TLANDO to the FDA contained deficiencies and as a result the defendants’

statements about our business and operations were false and misleading and/or lacked a reasonable basis in violation of federal securities

The lawsuit seeks certification as a class action (for a purported class of purchasers of the Company’s securities from March 27,

2019 through November 8, 2019), compensatory damages in an unspecified amount, and unspecified equitable or injunctive relief.

Company has insurance that covers claims of this nature.

The retention amount payable by the Company under our policy is $1.25 million.

The Company filed a motion to dismiss the class action lawsuit on July 24, 2020.

In response, the plaintiff’s filed their response to the motion to dismiss the class action lawsuit on September

Further, the Company intends to vigorously defend itself and its current and former officers and directors against these

allegations and has not recorded a liability related to this shareholder class action lawsuit as the outcome is not probable nor

can an estimate be made of loss, if any.

Beyond Solomon Abady v.

In response, the plaintiffs filed their response

to the motion to dismiss the class action lawsuit on September 22, 2020 and the Company filed its reply to its motion to dismiss

on October 22, 2020.

The Company intends to vigorously defend itself against these allegations and has not recorded a liability related

to this shareholder class action lawsuit as the outcome is not probable nor can an estimate be made of loss, if any.

On March 13, 2020, the Company filed U.S.

patent application

serial number 16/818,779 (“the Lipocine ‘779 Application”) with the United States Patent and Trademark Office (“USPTO”).

On October 16 and November 3, 2020, Lipocine filed suggestions for interference with the USPTO requesting that a patent

interference be declared between the Lipocine ‘779 Application and US patent application serial number 16/656,178 to Clarus Therapeutics, Inc.

(“the Clarus ‘178 Application”).

Pursuant to the Company’s request, the Patent Trial and Appeal Board (“PTAB”)

at the USPTO declared the interference on January 4, 2021 to ultimately determine, as between the Company and Clarus, who is entitled

to the claimed subject matter.

The interference number is 106,128, and the Company was initially declared Senior Party.

conference call with the PTAB was held on January 25, 2021 to discuss proposed motions.

On February 1, 2021, the PTAB

issued an order authorizing certain motions and setting the schedule for the preliminary motions phase.

Briefing is presently ongoing.

John Wajda, derivatively on behalf of Lipocine Inc.

Mahesh Patel, et al.

and Solomon Abady v.

Lipocine Inc.

2 unchanged sentences

Guarantees and Indemnifications

In the ordinary course of business, the Company enters

into agreements, such as lease agreements, licensing agreements, clinical trial agreements, and certain services agreements, containing

standard guarantee and / or indemnification provisions.

Additionally, the Company has indemnified its directors and officers to

the maximum extent permitted under the laws of the State of Delaware.

(11) Spriaso, LLC

On July 23, 2013, the Company entered into an

assignment/license and a services agreement with Spriaso, a related-party that is majority-owned by certain current and former

directors of Lipocine Inc.

In the ordinary course of business, the Company enters into

agreements, such as lease agreements, licensing agreements, clinical trial agreements, and certain services agreements, containing standard

guarantee and / or indemnification provisions.

Additionally, the Company has indemnified its directors and officers to the maximum extent

permitted under the laws of the State of Delaware.

( 11) Agreement with Spriaso, LLC

July 23, 2013, the Company entered into an assignment/license and a services agreement with Spriaso, a related-party that is majority-owned

by certain current and former directors of Lipocine Inc.

and their affiliates.

Under the license agreement, the Company assigned and transferred to Spriaso all

of the Company’s rights, title and interest in its intellectual property to develop products for the cough and cold field.

In addition, Spriaso received all rights and obligations under the Company’s product development agreement with a third-party.

In exchange, the Company will receive a royalty of 20 percent of the net proceeds received by Spriaso, up to a maximum of $10.0

Spriaso also granted back to the Company an exclusive license to such intellectual property to develop products outside

of the cough and cold field.

Under the service agreement, the Company provided facilities and up to 10 percent of the services

of certain employees to Spriaso for a period of 18 months which expired January 23, 2015.

Effective January 23, 2015, the Company

entered into an amended services agreement with Spriaso in which the Company agreed to continue providing up to 10 percent of the

services of certain employees to Spriaso at a rate of $230/hour for a period of six months.

Under the license agreement, the Company assigned and transferred

to Spriaso all of the Company’s rights, title and interest in its intellectual property to develop products for the cough and cold

In addition, Spriaso received all rights and obligations under the Company’s product development agreement with a third-party.

In exchange, the Company will receive a royalty of 20 percent of the net proceeds received by Spriaso, up to a maximum of $10.0 million.

Spriaso also granted back to the Company an exclusive license to such intellectual property to develop products outside of the cough and

Under the service agreement, the Company provided facilities and up to 10 percent of the services of certain employees to

Spriaso for a period of 18 months which expired January 23, 2015.

Effective January 23, 2015, the Company entered into an amended

services agreement with Spriaso in which the Company agreed to continue providing up to 10 percent of the services of certain employees

to Spriaso at a rate of $230/hour for a period of six months.

The agreement was further amended on July 23, 2015, on January 23,

2016, on July 23, 2016, on January 23, 2017, on July 23, 2017 , on January 23, 2018, on July 23, 2018 and

again on January 23, 2019 to extend the term of the agreement for an additional six months.

The agreement was further amended on

July 23, 2015, on January 23, 2016, on July 23, 2016, on January 23, 2017, on July 23, 2017, on January 23, 2018, on July 23, 2018

and again on January 23, 2019 to extend the term of the agreement for an additional six months.

The agreement was further amended

on July 23, 2019 and again on July 23, 2020 to extend the term of the agreement for an additional twelve months.

July 23, 2019 and again on July 23, 2020 to extend the term of the agreement for an additional twelve months.

The agreement

may be extended upon written agreement of Spriaso and the Company.

The Company did not receive any reimbursements during the three

and nine months ended September 30, 2020 and 2019, respectively.

Additionally, the Company did not receive any royalty payments

from Spriaso during the three and nine months ended September 30, 2020.

The Company received $165,000 during the three and nine

months ended September 30, 2019.

Spriaso filed its first NDA and as an affiliated entity of the Company, it used up the one-time

waiver for user fees for a small business submitting its first human drug application to the FDA.

The Company did not receive any reimbursements during the three months

ended March 31, 2021 and 2020, respectively.

Spriaso filed its first NDA and as an affiliated entity of the Company, it used up the

one-time waiver for user fees for a small business submitting its first human drug application to the FDA.

Spriaso is considered a variable

interest entity under the FASB ASC Topic 810-10, Consolidations , however the Company is not the primary beneficiary and

has therefore not consolidated Spriaso.

(12) Recent Accounting Pronouncements

interest entity under the FASB ASC Topic 810-10, Consolidations , however the Company is not the primary beneficiary and has therefore

not consolidated Spriaso.

Accounting Pronouncements

Accounting Pronouncements Issued Not Yet Adopted

2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Measurement

of Credit Losses on Financial Instruments (“ASU 2016-13”).

This standard replaces the incurred loss impairment

methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including

trade receivables, and requires entities to measure all expected credit losses for financial assets held at the reporting date

based on historical experience, current conditions and reasonable and supportable forecasts.

The original effective date for ASU

2016-13 was for annual and interim periods beginning after December 15, 2019.

October 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses, Derivatives and Hedging, and Leases:

Effective Dates , which deferred the effective date of ASU 2016-13 for certain entities, including those that are eligible to

be smaller reporting companies .

A company’s determination about whether it is eligible for the deferral is a

one-time assessment as of November 15, 2019 based on its most recent determination of its small reporting company eligibility as

of the last business day of the most recently completed second quarter.

Based on this determination, the Company qualifies as a

smaller reporting entity and is therefore eligible for the deferral of adoption of ASU 2016-13, resulting in a new effective date

of January 1, 2023.

The Company has historically not had credit losses on financial instruments and is currently evaluating the

impact the adoption of ASU 2016-13 will have on its consolidated financial statements

2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Measurement

of Credit Losses on Financial Instruments (“ASU 2016-13”).

This standard replaces the incurred loss impairment methodology

in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables,

and requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience,

current conditions and reasonable and supportable forecasts.

The original effective date for ASU 2016-13 was for annual and interim periods

beginning after December 15, 2019.

However, in October 2019,

the FASB issued ASU 2019-10, Financial Instruments - Credit Losses, Derivatives and Hedging, and Leases:

Effective Dates ,

which deferred the effective date of ASU 2016-13 for certain entities, including those that are eligible to be smaller reporting companies .

company’s determination about whether it is eligible for the deferral is a one-time assessment as of November 15, 2019 based

on its most recent determination of its small reporting company eligibility as of the last business day of the most recently completed

second quarter.

Based on this determination, the Company qualifies as a smaller reporting entity and is therefore eligible for the deferral

of adoption of ASU 2016-13, resulting in a new effective date of January 1, 2023.

The Company has historically not had credit losses

on financial instruments and is currently evaluating the impact the adoption of ASU 2016-13 will have on its consolidated financial statements.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

following discussion of our financial condition and results of operations should be read in conjunction with our unaudited

condensed consolidated financial statements and the related notes thereto and other financial information included elsewhere in this report.

For additional context with which to understand our financial condition and results of operations, see the management’s discussion

and analysis included in our Form 10-K, filed with the SEC on March 11, 2021 as well as the financial statements and related

notes contained therein.

As used in the discussion below, “we,”

“our,”

and “us”

refers to Lipocine.

Forward -Looking

section and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act

of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties.

Forward-looking

statements provide current expectations of future events based on certain assumptions and include any statement that does not directly

relate to any historical or current fact.

Forward-looking statements may refer to such matters as products, product benefits, pre-clinical

and clinical development timelines, clinical and regulatory expectations and plans, expected responses to regulatory actions, anticipated

financial performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market

performance, expected research and development and other expenses, future expectations for liquidity and capital resources needs and similar

Such words as “may”, “will”, “expect”, “continue”, “estimate”, “project”,

and “intend”

and similar terms and expressions are intended to identify forward looking statements.

Forward-looking statements

are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking

Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A (Risk

Factors) of this Form 10-Q, or in Part I, Item 1A (Risk Factors) of our Form 10-K filed with the SEC on March 11,

Except as required by applicable law, we assume no obligation to revise or update any forward-looking statements for any reason.

Overview of Our Business

We are a clinical-stage biopharmaceutical company

focused on applying our oral drug delivery technology for the development of pharmaceutical products focusing on metabolic and endocrine

Our proprietary delivery technologies are designed to improve patient compliance and safety through orally available treatment

Our primary development programs are based on oral delivery solutions for poorly bioavailable drugs.

We have a portfolio of proprietary

product candidates designed to produce favorable PK characteristics and facilitate lower dosing requirements, bypass first-pass metabolism

in certain cases, reduce side effects, and eliminate gastrointestinal interactions that limit bioavailability.

Our most advanced product candidate, TLANDO™,

is an oral TRT comprised of TU.

On December 8, 2020, we received tentative approval from the FDA regarding our NDA filed in February 2020

for TLANDO as a TRT in adult males for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism.

In granting tentative approval, the FDA concluded that TLANDO has met all required quality, safety and efficacy standards necessary for

However, TLANDO has not received final approval and is not eligible for final approval to market in the U.S.

until the expiration

of the exclusivity period previously granted to Clarus with respect to Jatenzo®, which expires on March 27, 2022.

We are currently

reviewing the FDA’s tentative approval of TLANDO and remain committed to taking appropriate actions with the goal of receiving final

approval to permit the launch of TLANDO.

The FDA has also required us to conduct certain post-marketing studies to (i) assess patient

understanding of key risks relating to TLANDO and (ii) evaluate development of adrenal insufficiency with chronic TLANDO therapy.

Additional pipeline candidates include LPCN 1144,

an oral prodrug of bioidentical testosterone comprised of TU for the treatment of NASH which is currently in Phase 2 testing, TLANDO XR,

a next generation oral TRT product comprised of testosterone tridecanoate (“TT”) with the potential for once daily dosing

which has completed Phase 2 testing, LPCN 1148, an oral prodrug of bioidentical testosterone for the treatment of management of cirrhosis,

and LPCN 1107, potentially the first oral HPC product indicated for the prevention of recurrent PTB, which has completed a dose finding

Phase 2 clinical study and has been granted orphan drug designation by the FDA.

LPCN 1144 is currently being tested in the LiFT

Phase 2 clinical study, a paired-biopsy study in confirmed non-cirrhotic NASH subjects.

Study enrollment has been completed and positive

top-line primary endpoint results after 12 weeks of treatment were released in January 2021.

Treatments with LPCN 1144 resulted in

robust liver fat reduction, assessed by MRI-PDFF technique, and showed improvement of liver injury markers with no observed tolerability

To date, we have funded our operations primarily

through the sale of equity securities, debt and convertible debt and through up-front payments, research funding and royalty and milestone

payments from our license and collaboration arrangements.

We have not generated any revenues from product sales and we do not expect to

generate revenue from product sales unless and until we obtain regulatory approval of TLANDO or other products.

have incurred losses in most years since our inception.

As of March 31, 2021, we had an accumulated deficit of $175.4 million.

Income and losses fluctuate year to year, primarily depending on the nature and timing of research and development occurring on our product

Our net loss was $3.4 million for the three months ended March 31, 2021, compared to $5.8 million for the three months

ended March 31, 2020.

Substantially all of our operating losses resulted from expenses incurred in connection with our product candidate

development programs, our research activities and general and administrative costs, including on-going litigation, associated with our

We expect to continue to incur significant expenses

and operating losses for the foreseeable future as we:

conduct any other post-approval clinical studies required in support of TLANDO;

perform pre-commercialization and commercialization activities in support of TLANDO;

conduct further development of our other product candidates, including LPCN 1144 and LPCN 1148;

continue our research efforts;

research new products or new uses for our existing products;

maintain, expand and protect our intellectual property portfolio;

provide general and administrative support for our operations, including on-going litigation.

To fund future long-term operations, including

the potential commercialization of TLANDO or other products, we will need to raise additional capital.

The amount and timing of future

funding requirements will depend on many factors, including capital market conditions, regulatory requirements and outcomes related to

TLANDO, regulatory requirements related to our other product development programs, the timing and results of our ongoing development efforts,

the potential expansion of our current development programs, potential new development programs, our ability to license our products to

third parties, the pursuit of various potential commercial activities and strategies associated with our development programs and related

general and administrative support.

We anticipate that we will seek to fund our operations through public or private equity or debt financings

or other sources, such as potential license, partnering and collaboration agreements.

We cannot be certain that anticipated additional

financing will be available to us on favorable terms, in amounts sufficient to fund our operations (including the commercialization of

TLANDO if we receive FDA approval), or at all.

Although we have previously been successful in obtaining financing through public and private

equity securities offerings and our license and collaboration agreements, there can be no assurance that we will be able to do so in the

Our Product Candidates

Our current portfolio includes our most advanced

product candidate, TLANDO, an oral TRT product candidate, which received tentative approval from the FDA on December 8, 2020.

Additionally,

we are in the process of establishing our pipeline of other clinical candidates including an oral androgen therapy for the treatment of

non-cirrhotic NASH, LPCN 1144, a next-generation potential once daily oral TRT, TLANDO XR, an androgen therapy for the management of cirrhosis,

LPCN 1148, an oral therapy for the prevention of PTB, LPCN 1107 and we continue to explore other product candidates targeting indications

with a significant unmet need.

These products are based on our proprietary Lip’ral

drug delivery technology platform.

Lip’ral technology is a patented technology based on lipidic compositions which form an optimal

dispersed phase in the gastrointestinal environment for improved absorption of insoluble drugs.

The drug loaded dispersed phase presents

the solubilized drug efficiently at the absorption site (gastrointestinal tract membrane) thus improving the absorption process and making

the drug less dependent on physiological variables such as dilution, gastro-intestinal pH and food effects for absorption.

Lip’ral

based formulation enables improved solubilization and higher drug-loading capacity, which can lead to improved bioavailability, reduced

dose, faster and more consistent absorption, reduced variability, reduced sensitivity to food effects, improved patient compliance, and

targeted lymphatic delivery where appropriate.

Our Development Pipeline

An Oral Product Candidate for Testosterone Replacement

Our most advanced product, TLANDO, is an oral formulation

of the chemical, TU, which is an eleven carbon side chain attached to T.

TU is an ester prodrug of T.

An ester is chemically formed by

bonding an acid and an alcohol.

Upon the cleavage, or breaking, of the ester bond, T is formed.

TU has been approved for use outside the

United States for many years for delivery via intra-muscular injection and in oral dosage form and more recently TU has received regulatory

approval in the United States for delivery via intra-muscular injection and in oral dosage form.

We are using our proprietary technology

to facilitate steady gastrointestinal solubilization and absorption of TU.

Proof of concept was initially established in 2006, and subsequently

TLANDO was licensed in 2009 to Solvay Pharmaceuticals, Inc.

which was then acquired by Abbott.

Following a portfolio review associated

with the spin-off of AbbVie by Abbott in 2011, the rights to TLANDO were reacquired by us.

All obligations under the prior license agreement

have been completed except that Lipocine will owe Abbott a perpetual 1% royalty on net sales.

Such royalties are limited to $1 million

in the first two calendar years following product launch, after which period there is not a cap on royalties and no maximum aggregate

If generic versions of any such product are introduced, then royalties are reduced by 50%.

NDA PDUFA Outcome

On December 8, 2020 we received tentative

approval from the FDA regarding our NDA filed in February 2020 for TLANDO as a TRT in adult males for conditions associated with

a deficiency of endogenous testosterone, also known as hypogonadism.

In granting tentative approval, the FDA concluded that TLANDO has

met all required quality, safety and efficacy standards necessary for approval.

However, TLANDO has not received final approval and is

not eligible for final approval to market in the U.S.

until the expiration of the exclusivity period previously granted to Clarus with

respect to Jatenzo®, which expires on March 27, 2022.

We are currently reviewing the FDA’s tentative approval of TLANDO

and remain committed to taking appropriate actions with the goal of receiving final approval to permit the launch of TLANDO.

Under the Pediatric Research Equity Act (“PREA”),

if TLANDO receives full approval, we will need to address the PREA requirement to assess the safety and effectiveness of TLANDO in pediatric

The FDA has also required us to conduct certain post-marketing studies including:

(i) conduct an appropriately designed

label comprehension and knowledge study that assesses patient understanding of key risk messages in the Medication Guide for TLANDO and

(ii) conduct an appropriately designed one-year trial to evaluate development of adrenal insufficiency with chronic TLANDO therapy.

The timetables for these post-marketing requirements will be established at the time of full approval of TLANDO.

We are actively pursuing

and currently evaluating commercial alternatives with TLANDO, should it receive FDA approval, including out-licensing TLANDO to a third-party,

launching TLANDO on our own, or launching TLANDO on our own with the assistance from a “risk share”

Recent Competition Update

On March 27, 2019, Clarus’

product JATENZO®,

an oral TU product, was approved by the FDA and also received three years of data exclusivity.

On February 10, 2020, Clarus announced

that JATENZO®

has been launched and is commercially available.

Based on the FDA’s tentative approval of TLANDO, we will not

be able to begin marketing TLANDO until March 27, 2022, the expiration of the exclusivity period granted to Clarus with respect to

JATENZO®.

Additionally, our competitors may introduce other

T-replacement therapies.

For example, on January 5, 2021 Marius submitted a NDA to the FDA seeking approval of KYZATREX®, its

novel oral TU soft gelatin capsule for the treatment of primary and secondary hypogonadism in adult men.

According to Marius, it has been

assigned a PDUFA date of October 31, 2021 for KYZATREX®.

We are also aware of other pharmaceutical companies

that have T-replacement therapies or testosterone therapies in development that may be approved for marketing in the United States or

outside of the United States.

Based on publicly available information, we believe

that several other T-replacement therapies that would be competitive with TLANDO are in varying stages of development, some of which may

be approved, marketed and/or commercialized prior to TLANDO.

These therapies include T-gels, oral-T, an aromatase inhibitor, a new class

of drugs called Selective Androgen Receptor Modulators and hydroalcoholic gel formulations of DHT.

An Oral Prodrug of Bioidentical Testosterone Product

Candidate for the Treatment of NASH

We are currently evaluating LPCN 1144, an oral

prodrug of bioidentical testosterone comprised of TU, for the treatment of non-cirrhotic NASH.

NASH is a more advanced state of NAFLD

and can progress to a cirrhotic liver and eventually hepatocellular carcinoma/ liver cancer.

Twenty to thirty percent of the U.S.

is estimated to suffer from NAFLD and fifteen to twenty percent of this group progress to NASH, which is a substantially large population

that lacks effective therapy.

Currently, there are no FDA approved treatments for NASH, a silent killer that affects approximately 30

million Americans.

Approximately 50% of NASH patients are in adult males.

NAFLD/NASH is becoming more common due to its strong correlation

with obesity and metabolic syndrome, including components of metabolic syndrome such as diabetes, cardiovascular disease and high blood

In men, especially with comorbidities associated with NAFLD/NASH, testosterone deficiency has been associated with an increased

accumulation of visceral adipose tissue and insulin resistance, which could be factors contributing to NAFLD/NASH.

There is currently

no approved therapy for the treatment of NASH although there are several drug candidates currently under development with many having

clinical failures to date.

History of Liver Disease

The liver is the largest internal organ in the

human body and its proper function is indispensable for many critical metabolic functions, including the regulation of lipid and sugar

metabolism, the production of important proteins, including those involved in blood clotting, and purification of blood.

There are over

100 described diseases of the liver, and because of its many functions, these can be highly debilitating and life-threatening unless effectively

Liver diseases can result from injury to the liver caused by a variety of insults, including HCV, HBV, obesity, chronic excessive

alcohol use or autoimmune diseases.

Regardless of the underlying cause of the disease, there are important similarities in the disease

progression including increased inflammatory activity and excessive liver cell apoptosis, which if unresolved leads to fibrosis.

if allowed to progress, will lead to cirrhosis, or excessive scarring of the liver, and eventually reduced liver function.

Some patients

with liver cirrhosis have a partially functioning liver and may appear asymptomatic for long periods of time, which is referred to as

decompensated liver disease.

Decompensated liver disease is when the liver is unable to perform its normal functions.

Many people with

active liver disease remain undiagnosed largely because liver disease patients are often asymptomatic for many years.

Markers of Liver Cell Death

ALT is an enzyme that is produced in liver cells

and is naturally found in the blood of healthy individuals.

In liver disease, liver cells are damaged and as a consequence, ALT is released

into the blood, increasing ALT levels above the normal range.

Physicians routinely test blood levels of ALT to monitor the health of a

patient's liver.

ALT level is a clinically important biochemical marker of the severity of liver inflammation and ongoing liver disease.

Elevated levels of ALT represent general markers of liver cell death and inflammation without regard to any specific mechanism.

a second enzyme found in the blood that is produced in the liver and routinely measured by physicians along with ALT.

As with ALT, AST

is often elevated in liver disease and, like ALT, is considered an overall marker of liver inflammation.

Relationship between Hypogonadism and NAFLD

Preclinical and clinical studies in the NAFLD/NASH

literature have shown the prevalence of testosterone deficiency across the NAFLD/NASH histological spectrum wherein low testosterone was

independently associated with NAFLD/NASH with an inverse relationship between testosterone and NAFLD/NASH symptom severity.

A recent NIDDK

report suggests that 75% of biopsy confirmed NASH subjects have less than 372 ng/dL of total testosterone and that the degree of fibrosis

severity is inversely related to free testosterone levels;

thus, providing a good rationale for testing LPCN 1144 in adult NASH patients

regardless of their hypogonadal status.

We have received clearance from the FDA to clinically investigate LPCN 1144 in an expanded target

population of adult male NASH patients.

Specifically, the FDA waived the limitation of only testing LPCN 1144 in NASH subjects with total

testosterone levels below 300 ng/dL (threshold for hypogonadism).

Post hoc analyses of our existing clinical trials

in subjects with comorbidities typically associated with NASH comorbidities indicate that testosterone therapy significantly and consistently

reduced elevated levels of key serum biomarkers (liver function enzymes and serum triglyceride) generally associated with NAFLD/NASH.

Current Status

We have initiated the LiFT Phase 2 clinical

study in confirmed non-cirrhotic NASH subjects.

The LiFT clinical study is a prospective, multi-center, randomized, double-blind,

placebo-controlled multiple-arm study in biopsy-confirmed hypogonadal or eugonadal male NASH subjects with grade F1/F3 fibrosis and a

NAFLD Activity Score ≥

4 with a 36-week treatment period.

The LiFT clinical study enrolled 56 biopsy confirmed NASH male subjects.

Subjects were randomized 1:1:1 to one of three arms (Treatment A is a twice daily oral dose of 142 mg testosterone equivalent, Treatment

B is a twice daily oral dose of 142 mg testosterone equivalent formulated with 217 mg of d-alpha tocopherol equivalent, and the third

arm is twice daily matching placebo).

We currently expect 36-week biopsy data in August 2021.

The primary endpoint of the LiFT clinical

study is change in hepatic fat fraction via MRI-PDFF and exploratory liver fat/marker end points post 12 weeks of treatment.

Additionally,

key secondary endpoints post 36 weeks of treatment include assessment of histological change for NASH resolution and/or fibrosis improvement

as well as liver fat data.

Other important endpoints include the following:

change in liver injury markers, anthropomorphic measurements,

lipids, insulin resistance and inflammatory/fibrosis markers;

as well as patient reported outcomes.

Additionally, subjects will have access to LPCN

1144 through an open label extension study.

The extension study will enable the collection of additional data on LPCN 1144 for up to a

total of 72 weeks of therapy.

Treatments with LPCN 1144 post 12 weeks of treatment

resulted in robust liver fat reduction, assessed by MRI-PDFF, and showed improvement of liver injury markers with no observed tolerability

Inclusion of d-alpha tocopherol formulated with the testosterone prodrug resulted in additional liver benefits, notably improved

key liver markers without compromising tolerability.

Key results are presented in the following tables:

Mean absolute liver fat using MRI-PDFF in all subjects (n=56)*

Change from baseline (CBL)

Placebo-adjusted CBL

Placebo (n = 19)

* Missing data was obtained using Multiple Imputation

Not significant (p > 0.05)

Mean relative liver fat using MRI-PDFF at Week 12 in subjects (n=52) with liver fat ≥

5% at baseline.*

Change from baseline (CBL)

Placebo-adjusted CBL

Placebo (n = 18)

* Based on available data.

Responders with > 30% Relative Reduction in Liver Fat at

Week 12, Intent to Treat Dataset (n=56)*.

(% of subjects)

Placebo (n = 19)

* Subjects with missing data are considered non-responders

Average changes in key serum liver injury markers ALT and

AST at Week 12 (n=52)*.

Placebo-Adjusted Absolute

Placebo (n = 17)

* All available data

the 12 weeks of treatment, the observed rate and severity of Treatment Emergent Adverse Events (“TEAEs”) in both the LPCN

1144 treatment arms were comparable to the placebo arm.

Three subjects in the placebo group and one subject in the combined treatment

arms discontinued study drug due to TEAEs.

We currently expect 36-week biopsy data in August 2021.

Previous to the LiFT clinical study, we

completed a 16-week POC liver imaging clinical study to assess liver fat changes in hypogonadal men at risk of developing NASH using MRI-PDFF

Treatment results from the POC liver imaging study demonstrated that 48% of the treated NAFLD subjects, defined as baseline

liver fat of at least 5%, had NAFLD resolution, defined as liver fat <5% post treatment.

Additionally, 100% of the subjects experiencing

NAFLD resolution had at least a 35% relative liver fat reduction from baseline with a relative mean liver fat reduction of 55% in this

A Next-Generation Long-Acting Oral Product Candidate

TLANDO XR is a next-generation, novel ester prodrug

of testosterone comprised of TT which uses the Lip’ral technology to enhance solubility and improve systemic absorption.

a Phase 2b dose finding study in hypogonadal men in the third quarter of 2016.

The primary objectives of the Phase 2b clinical study were

to determine the starting Phase 3 dose of TLANDO XR along with safety and tolerability of TLANDO XR and its metabolites following oral

administration of single and multiple doses in hypogonadal men.

The Phase 2b clinical trial was a randomized, open label, two-period,

multi-dose PK study that enrolled hypogonadal males into five treatment groups.

Each of the 12 subjects in a group received treatment

Results of the Phase 2b study suggest that the primary objectives were met, including identifying the dose expected to be

tested in a Phase 3 study.

Good dose-response relationship was observed over the tested dose range in the Phase 2b study.

Additionally,

the target Phase 3 dose met primary and secondary end points.

Overall, TLANDO XR was well tolerated with no drug-related severe or serious

adverse events reported in the Phase 2b study.

Additionally in October 2014, we completed

a Phase 2a proof -of-concept (“POC”) study in hypogonadal men.

The Phase 2a open-label, dose-escalating single and multiple

dose study enrolled 12 males.

Results from the Phase 2a clinical study demonstrated the feasibility of a once daily dosing with TLANDO

XR in hypogonadal men and a good dose response.

Additionally, the study confirmed that steady state is achieved by day 14 with consistent

inter-day performance observed on day 14, 21 and 28.

No subjects exceeded Cmax of 1500 ng/dL at any time during the 28-day dosing period

on multi-dose exposure.

Overall, TLANDO XR was well tolerated with no serious AE’s reported.

We have also completed a preclinical toxicology study with

TLANDO XR in dogs.

In February 2018 we had a meeting with the

FDA to discuss these pre-clinical results and to discuss the Phase 3 clinical study and path forward for TLANDO XR.

Based on the results

of the FDA meeting and additional pre-clinical trials conducted after the FDA meeting, we have proposed a Phase 3 protocol for TLANDO

XR and have solicited FDA feedback.

Based on initial FDA feedback, we expect the Phase 3 clinical trial design to follow the International

Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (“ICH”) guidelines and will include

a three-month efficacy treatment period and a one-year safety component for up to 100 subjects.

We continue to refine the Phase 3 protocol

and plan to request FDA approval of the protocol once it is finalized.

Additionally, the FDA previously requested that a food effect study

needs to be completed, and that ambulatory blood pressure monitoring (“ABPM”) be included as part of the Phase 3 clinical

We anticipate the next steps in developing TLANDO XR will be to scale up the formulation and conduct a food effect study with TLANDO

We are also exploring the possibility of licensing TLANDO XR to a third party, although no licensing agreement has been entered into

An Oral Prodrug of Bioidentical Testosterone Product

Candidate for the Management of Cirrhosis

Cirrhosis is end-stage NAFLD for which there is

no FDA approved drug treatment.

Liver cirrhosis is estimated to affect in excess of 600,000 Americans, with men affected at twice the

rate of women, and results in approximately 45,000 deaths every year.

Due to a lack of available organs, only a third of waitlisted patients

are getting liver transplants, and patients that do receive a transplant are increasingly being described as frail.

Low testosterone affects

up to 90% of cirrhotic men, and is a predictor of mortality and increased adverse events including ascites, hepatic encephalopathy, and

clinically significant portal hypertension.

We are targeting LPCN 1148 for the management of patients with liver cirrhosis.

LPCN 1148 will address current unmet needs for patients with liver cirrhosis including improvement in the quality of life of patients

while on the liver transplant waiting list, allow patients to stay on the liver transplant waiting list longer, and improvement in post

liver transplant survival, including outcomes and costs.

We are currently formulating plans to conduct a

Phase 2 POC study in male cirrhotic subjects through consultations with the FDA and key opinion leaders to evaluate the therapeutic potential

of LPCN 1148 for the management of cirrhotic subjects.

On May 5, 2020 the FDA accepted our IND to initiate a Phase 2 POC study to

evaluate the therapeutic potential of LPCN 1148 for the management of liver cirrhosis in adult male cirrhotic patients.

The planned Phase

2 POC study is a prospective, multi-center, randomized, placebo-controlled study in approximately 50 to 60 male cirrhotic patients that

are on the liver transplant list.

Subjects will be randomized 1:1 to one of two arms.

The treatment arm is an oral dose of a testosterone

ester and the second arm is matching placebo.

The primary endpoint is change in skeletal muscle index at week 24 with key secondary endpoints

including change in liver frailty index and clinically significant worsening in mortality.

Total treatment is expected to be 52 weeks.

We currently expect the first subject will be dosed in the second half of 2021.

An Oral Product Candidate for the Prevention of Preterm

We believe LPCN 1107 has the

potential to become the first oral HPC product indicated for the reduction of risk of PTB (delivery less than 37 weeks) in women with

singleton pregnancy who have a history of singleton spontaneous PTB.

Prevention of PTB is a significant unmet need as approximately 11.7%

pregnancies result in PTB, a leading cause of neonatal mortality and morbidity.

We have completed a multi-dose PK dose selection

study in pregnant women.

The objective of the multi-dose PK selection study was to assess HPC blood levels in order to identify the appropriate

LPCN 1107 Phase 3 dose.

The multi-dose PK dose selection study was an open-label, four-period, four-treatment, randomized, single and

multiple dose, PK study in pregnant women of three dose levels of LPCN 1107 and the IM HPC (Makena®).

The study enrolled 12 healthy

pregnant women (average age of 27 years) with a gestational age of approximately 16 to 19 weeks.

Subjects received three dose levels of

LPCN 1107 (400 mg BID, 600 mg BID, or 800 mg BID) in a randomized, crossover manner during the first three treatment periods and then

received five weekly injections of HPC during the fourth treatment period.

During each of the LPCN 1107 treatment periods, subjects received

a single dose of LPCN 1107 on Day 1 followed by twice daily administration from Day 2 to Day 8.

Following completion of the three LPCN

1107 treatment periods and a washout period, all subjects received five weekly injections of HPC.

Results from this study demonstrated

that average steady state HPC levels (Cavg0-24) were comparable or higher for all three LPCN 1107 doses than for injectable HPC.

Additionally,

HPC levels as a function of daily dose were linear for the three LPCN 1107 doses.

Also, unlike the injectable HPC, steady state exposure

was achieved for all three LPCN 1107 doses within seven days.

We have also completed a proof-of-concept Phase 1b clinical study of LPCN

1107 in healthy pregnant women in January 2015 and a POC Phase 1a clinical study of LPCN 1107 in healthy non-pregnant women in May 2014.

These studies were designed to determine the PK and bioavailability of LPCN 1107 relative to an IM HPC, as well as safety and tolerability.

A traditional PK/PD based Phase 2 clinical study

in the intended patient population is not expected to be required prior to entering into Phase 3.

Therefore, based on the results of our

multi-dose PK study we had an End-of-Phase 2 meeting and subsequent guidance meetings with the FDA to define a pivotal Phase 2b/3 development

plan for LPCN 1107.

However, these discussions will need to be updated based on recent developments with Covis’

plan to resume our interactions with the FDA to discuss our pivotal Phase 2b/3 clinical trial design and better understand next steps

to advance LPCN 1107.

Additionally, a pivotal Phase 2b/3 study will not occur until the results from a planned food-effect study with

LPCN 1107 are reviewed by the FDA, though manufacturing scale-up work for LPCN 1107 has been completed.

We do not anticipate the initiation of a pivotal

Phase 2b/3 study with LPCN 1107 to occur in 2021 until the required food effect study is complete.

We currently intend to proceed with

plans to conduct the required food effect clinical study.

We are exploring the possibility of licensing LPCN 1107 to a third party, although

no licensing agreement has been entered into by the Company.

No assurance can be given that any license agreement will be completed, or,

if an agreement is completed, that such an agreement would be on acceptable terms.

The FDA has granted orphan

drug designation to LPCN 1107 based on a major contribution to patient care.

Orphan designation qualifies Lipocine for various development

incentives, including tax credits for qualified clinical testing, and a waiver of the prescription drug user fee when we file our NDA.

Recent Competition Update

October 5, 2020, the FDA’s CDER proposed that Makena be withdrawn from the market because the PROLONG trial failed to

verify the clinical benefit of Makena and concluded that the available evidence does not show Makena is effective for its approved use.

issued AMAG, the NDA holder at the time, an NOOH to withdraw approval of Makena, for which AMAG Pharmaceuticals responded by requesting

a hearing and providing detail on the company’s position, recognizing clinicians’

decade-long use of Makena’s treatment

and the public health implications of withdrawing approval.

The FDA Commissioner has not determined whether it will hold

a public hearing, and if one is granted, the process is expected to take months.

During this time, Makena and the approved generics of

Makena will remain on the market until the FDA makes a final decision about these products.

Currently, Makena and the approved generics of

Makena are the only products approved for the prevention of recurrent preterm birth.

The FDA also indicated that it intends to hold

a meeting with experts in obstetrics, neonatal care, and clinical trial design to discuss how to facilitate development of effective and

safe therapies to treat preterm birth.

Financial Operations Overview

date, we have not generated any revenues from product sales and do not expect to do so until one of our product candidates receives approval

from the FDA.

Revenues to date have been generated substantially from license fees, royalty and milestone payments and research

support from our licensees.

Since our inception through March 31, 2021, we have generated $28.1 million in revenue under our various

license and collaboration arrangements and from government grants.

We may never generate revenues from TLANDO or any of our other clinical

or preclinical development programs or licensed products as we may never succeed in obtaining regulatory approval or commercializing any

of these product candidates.

Research and Development Expenses

and development expenses consist primarily of salaries, benefits, stock-based compensation and related personnel costs, fees paid to external

service providers such as contract research organizations and contract manufacturing organizations, contractual obligations for clinical

development, clinical sites, manufacturing and scale-up for late-stage clinical trials, formulation of clinical drug supplies, and expenses

associated with regulatory submissions.

Research and development expenses also include an allocation of indirect costs, such as those

for facilities, office expense, travel, and depreciation of equipment based on the ratio of direct labor hours for research and development

personnel to total direct labor hours for all personnel.

We expense research and development expenses as incurred.

Since our inception,

we have spent approximately $ 122.4 million in research and development expenses through March 31, 2021.

December 8, 2020 we received tentative approval from the FDA regarding our NDA filed in February 2020 for TLANDO as a

TRT in adult males for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism.

In granting tentative

approval, the FDA concluded that TLANDO has met all required quality, safety and efficacy standards necessary for approval.

However, TLANDO

has not received final approval and is not eligible for final approval to market in the U.S.

until the expiration of the exclusivity period

previously granted to Clarus with respect to Jatenzo®, which expires on March 27, 2022.

As a result, we are uncertain as to whether

we will incur additional research and developments costs for TLANDO.

Any further expenditures, if needed, are subject to numerous uncertainties

regarding timing and cost to completion.

We expect to continue to incur significant costs

as we develop our other product candidates, including the ongoing LiFT Phase 2 clinical study with LPCN 1144.

In general, the cost of clinical trials may vary

significantly over the life of a project as a result of uncertainties in clinical development, including, among others:

the number of sites included in the trials;

the length of time required to enroll suitable subjects;

the duration of subject follow-ups;

the length of time required to collect, analyze and report trial results;

the cost, timing and outcome of regulatory review;

potential changes by the FDA in clinical trial and NDA filing requirements for testosterone replacement therapies.

We have also incurred significant manufacturing

costs to prepare launch supplies for TLANDO and additional expenditures will be required to prepare for a commercial launch of TLANDO,

should it be approved.

However, future expenditures are subject to numerous uncertainties regarding timing and cost to completion, including,

among others:

the timing and outcome of regulatory filings and FDA reviews and actions for TLANDO;

our dependence on third-party manufacturers for the production of satisfactory finished product for registration and launch should

regulatory approval be obtained;

the potential for future license or co-promote arrangements for TLANDO, when such arrangements will be secured, if at all, and to

what degree such arrangements would affect our future plans and capital requirements;

the effect on our product development activities of actions taken by the FDA or other regulatory authorities.

A change of outcome for any of these variables

with respect to the development of TLANDO and our other product development candidates could mean a substantial change in the costs and

timing associated with these efforts, will require us to raise additional capital, and may require us to reduce operations.

Given the stage of clinical development and the

significant risks and uncertainties inherent in the clinical development, manufacturing and regulatory approval process, we are unable

to estimate with any certainty the time or cost to complete the development of LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1107 and other product

Clinical development timelines, the probability of success and development costs can differ materially from expectations

and results from our clinical trials may not be favorable.

If we are successful in progressing LPCN 1144, TLANDO XR, LPCN 1148, LPCN

1107 or other product candidates into later stage development, we will require additional capital.

The amount and timing of our future

research and development expenses for these product candidates will depend on the preclinical and clinical success of both our current

development activities and potential development of new product candidates, as well as ongoing assessments of the commercial potential

of such activities.

Summary of Research and Development Expense

We are conducting on-going clinical and regulatory

activities with most of our product candidates.

Additionally, we incur costs for our other research programs.

The following table summarizes

our research and development expenses:

Three Months Ended March 31,

External service provider costs:

Total external service provider costs

Internal personnel costs

Other research and development costs

Total research and development

We expect research and development expenses to

increase in the future as we complete on-going clinical studies, including the LiFT Phase 2 clinical study with LPCN 1144, as we

conduct future clinical studies, including when and if we conduct Phase 2 clinical studies with LPCN 1148 and Phase 3 clinical studies

with TLANDO XR and LPCN 1107, and as we manufacture commercial supplies of TLANDO pre-approval.

However, if we are unable to raise additional

capital, we may need to reduce research and development expenses in order to extend our ability to continue as a going concern.

General and Administrative Expenses

General and administrative expenses consist primarily

of salaries and related benefits, including stock-based compensation related to our executive, finance, business development, marketing,

sales and support functions.

Other general and administrative expenses include rent and utilities, travel expenses, professional

fees for auditing, tax and legal services, litigation settlement and market research and market analytics.

General and administrative expenses also include

expenses for the cost of preparing, filling and prosecuting patent applications and maintaining, enforcing and defending intellectual

property-related claims, including our on-going patent interference and patent infringement lawsuits against Clarus.

We expect that general and administrative expenses

will increase in the future as we incur additional legal fees in the on-going court cases with Clarus.

Additional areas that may see increases

as we mature as a public company include legal and consulting fees, accounting and audit fees, director fees, increased directors’

and officers’

insurance premiums, fees for investor relations services and enhanced business and accounting systems, litigation

costs, professional fees and other costs.

If TLANDO is approved by the FDA, we expect we will incur significant additional expenses relating

to the commercialization of TLANDO, including, among other things, expenses relating to building out sales and marketing teams, manufacturing

expenses, expenses relating to licensing TLANDO to third parties, and other expenses.

However, if we are unable to raise additional capital,

we may need to reduce general and administrative expenses in order to extend our ability to continue as a going concern.

If we are unable

to raise additional capital, we may be unable to effectively commercialize TLANDO after receiving FDA approval.

Other Expense (Income), Net

expense (income), net consists primarily of interest income earned on our cash, cash equivalents and marketable investment securities

and interest expense incurred on our outstanding Loan and Security Agreement and losses (gains) on our warrant liability.

Results of Operations

of the Three Months Ended March 31, 2021 and 2020

following table summarizes our results of operations for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

Research and development expenses

General and administrative expenses

Interest and investment income

Interest expense

Unrealized loss on warrant liability

Income tax expense

Research and Development Expenses

decrease in research and development expenses during the three months ended March 31, 2021 was primarily due to a $966,000

decrease in contract research organization expense and outside consulting costs related to the LPCN 1144 LiFT Phase 2 clinical

study in NASH subjects, and a $70,000 decrease in raw materials costs related to TLANDO XR, offset by a $78,000 increase in personnel

expense as well as increases in other R&D expenses of $26,000.

General and Administrative Expenses

decrease in general and administrative expenses during the three months ended March 31, 2021 was primarily due to a $608,000

decrease in legal costs due to less activity in 2021 as compared to 2020 with the following activities:

lawsuit filed against Clarus Therapeutics

for patent infringement in April 2019 and the on-going class action lawsuit defense;

in addition to a $15,000 decrease in personnel

These decreases were offset by a $50,000 increase in corporate insurance expenses and a $22,000 increase in other general and administrative

Interest and Investment Income

decrease in interest and investment income during the three months ended March 31, 2021 was due to lower interest rates in

2021 compared to 2020.

Interest Expense

decrease in interest expense during the three months ended March 31, 2021 was due to a decrease in interest expense on our

Loan and Security Agreement with SVB, as a result of lower principal balances and lower interest rates in 2021 compared to 2020.

on Warrant Liability

We recorded a loss of $195,000 and $1.1 million,

respectively, on warrant liability during the three months ended March 31, 2021 and 2020 related to the change in the fair value

of outstanding common stock warrants issued in the November 2019 Offering.

The loss in 2021 and 2020 was mainly attributable to an

increase in the value of warrants outstanding as of March 31, as compared to December 31, in both 2021 and 2020 due to an increase

in our stock price.

There were 10,000 and 121,000 common stock warrants from the November 2019 Offering exercised during the three

months ended March 31, 2021 and March 31, 2020, respectively.

The warrants are classified as a liability due to a provision

contained within the warrant agreement which allows the warrant holder the option to elect to receive an amount of cash equal to the value

of the warrants as determined in accordance with the Black-Scholes option pricing model with certain defined assumptions upon a change

The warrant liability will continue to fluctuate in the future based on inputs to the Black-Scholes model including our current

stock price, the remaining life of the warrants, the volatility of our stock price, the risk-free interest rate and the number of common

stock warrants outstanding.

Liquidity and Capital Resources

Since our inception, our operations have been

primarily financed through sales of our equity securities, debt and payments received under our license and collaboration arrangements.

We have devoted our resources to funding research and development programs, including discovery research, preclinical and clinical development

We have incurred operating losses in most years since our inception and we expect to continue to incur operating losses into

the foreseeable future as we evaluate our options related to TLANDO should it receive final approval and as we advance clinical development

of LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1107 and any other product candidate, including continued research efforts.

of March 31, 2021, we had $50.0 million of unrestricted cash, cash equivalents and marketable investment securities compared

to $19.7 million at December 31, 2020.

Additionally, as of December 31, 2020 we had $5.0 million of restricted cash, which was

required to be maintained as cash collateral under the SVB Loan and Security Agreement until TLANDO is approved by the FDA.

February 16, 2021, we amended the Loan and Security Agreement with SVB (as defined below) to, among other things, remove the cash

collateral requirement.

On January 28, 2021, we completed a public

offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended (“January 2021

Offering”).

The gross proceeds from the January 2021 Offering were approximately $28.7 million, before deducting underwriter

fees and other offering expenses of $1.9 million.

In the January 2021 Offering, we sold 16,428,571 shares of our common stock.

On April 21, 2020, we entered

into a loan (the “Loan”) from SVB in the aggregate amount of $234,000, pursuant to the Paycheck Protection Program (the “PPP”)

under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The Loan, which was in the form of a note dated April 21,

2020, originally matured on April 21, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 21,

Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in

the CARES Act.

On November 2, 2020, we were notified by the Small Business Administration that our PPP Loan had been forgiven.

On February 27, 2020, we completed a registered

direct offering of securities registered under an effective registration statement filed pursuant to the Securities Act of 1933, as amended

(“February 2020 Offering”).

The gross proceeds from the February 2020 Offering were approximately $6.0 million,

before deducting placement agent fees and other offering expenses of $347,000.

In the February 2020 Offering, the Company sold 10,084,034

Class A Units, with each Class A Unit consisting of one share of common stock and a one-half of one common warrant to purchase

one share of common stock, at a price of $0.595 per Class A Unit.

The common stock warrants were immediately exercisable at an exercise

price of $0.53 per share, subject to adjustment, and expire on February 27, 2025.

By their terms, however, the common stock warrants

cannot be exercised at any time that the common stock warrant holder would beneficially own, after such exercise, more than 4.99% (or,

at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to such exercise.

On November 18, 2019, we completed the November 2019

The gross proceeds from the November 2019 Offering were approximately $6.0 million, before deducting placement agent fees

and other offering expenses of $404,000.

In the November 2019 Offering, the Company sold (i) 10,450,000 Class A Units,

with each Class A Unit consisting of one share of common stock and a common warrant to purchase one share of common stock, and (ii) 1,550,000

Class B Units, with each Class B Unit consisting of one pre-funded warrant to purchase one share of common stock and one common

warrant to purchase one share of common stock, at a price of $0.50 per Class A Unit and $0.4999 per Class B Unit.

The pre-funded

warrants, which were exercised for common stock in December 2019, were issued in lieu of common stock in order to ensure the purchaser

did not exceed certain beneficial ownership limitations.

The pre-funded warrants were immediately exercisable at an exercise price of

$.0001 per share, subject to adjustment.

Additionally, the common stock warrants were immediately exercisable at an exercise price of

$0.50 per share, subject to adjustment, and expire on November 17, 2024.

By their terms, however, neither the pre-funded warrants

nor the common stock warrants can be exercised at any time that the pre-funded warrant holder or the common stock warrant holder would

beneficially own, after such exercise, more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding

after giving effect to such exercise.

On January 5, 2018, we entered into the Loan

and Security Agreement with SVB pursuant to which SVB agreed to lend us $10.0 million.

The principal borrowed under the Loan and Security

Agreement bears interest at a rate equal to the Prime Rate, as reported in money rates section of The Wall Street Journal or any successor

publication representing the rate of interest per annum then in effect, plus one percent per annum, which interest is payable monthly.

Additionally on April 1, 2020, we entered into a Deferral Agreement with SVB.

Under the Deferral Agreement, principal repayments

were deferred by six months and we were only required to make monthly interest payments during the deferral period.

The Loan matures on

June 1, 2022.

Previously, we were only required to make monthly interest payments until December 31, 2018, following which we

also made equal monthly payments of principal and interest until the signing of the Deferral Agreement.

We will also be required to pay

an additional final payment at maturity equal to $650,000 (the “Final Payment Charge”).

At our option, we may prepay all amounts

owed under the Loan and Security Agreement (including all accrued and unpaid interest and the Final Payment Charge).

In connection with

the Loan and Security Agreement, we granted to SVB a security interest in substantially all of our assets now owned or hereafter acquired,

excluding intellectual property and certain other assets.

In addition, as TLANDO was not approved by the FDA by May 31, 2018, we

were required to maintain $5.0 million of cash collateral at SVB until such time as TLANDO is approved by the FDA.

However on February 16,

2021, we amended the Loan and Security Agreement with SVB to, among other things, remove the financial trigger and financial trigger release

event provisions requiring us to maintain a minimum cash collateral value and collateral pledge thereof.

While any amounts are outstanding

under the Loan and Security Agreement, we are subject to a number of affirmative and negative covenants, including covenants regarding

dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates,

among other customary covenants.

The credit facility also includes events of default, the occurrence and continuation of which could cause

interest to be charged at the rate that is otherwise applicable plus 5.0% and would provide SVB, as collateral agent, with the right to

exercise remedies against us and the collateral securing the credit facility, including foreclosure against the property securing the

credit facilities, including our cash.

These events of default include, among other things, any failure by us to pay principal or interest

due under the credit facility, a breach of certain covenants under the credit facility, the Company’s insolvency, a material adverse

change, and one or more judgments against us in an amount greater than $100,000 individually or in the aggregate.

On March 6, 2017, we entered into the Sales

Agreement with Cantor pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering

price of up to the amount we have registered on an effective registration statement pursuant to which the offering is being made.

have registered up to $50.0 million for sale under the Sales Agreement, pursuant to our Registration Statement on Form S-3 (File

333-250072), through Cantor as our sales agent.

Cantor may sell our common stock by any method permitted by law deemed to be

an “at the market offering”

as defined in Rule 415(a)(4) of the Securities Act, including sales made directly on

or through the NASDAQ Capital Market or any other existing trade market for our common stock, in negotiated transactions at market prices

prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law.

Cantor uses its

commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell these

We pay Cantor 3.0% of the aggregate gross proceeds from each sale of shares under the Sales Agreement.

We have also provided Cantor

with customary indemnification rights.

The shares of our common stock sold under the

Sales Agreement are sold and issued pursuant to our Registration Statement on Form S-3 (File No.

333-250072) (the “Form S-3”),

which was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus

We are not obligated to make any sales of our

common stock under the 2020 Sales Agreement.

The offering of our common stock pursuant to the 2020 Sales Agreement will terminate upon

the termination of the 2020 Sales Agreement as permitted therein.

We and Cantor may each terminate the 2020 Sales Agreement at any time

upon ten days’

prior notice.

the three months ended March 31, 2021, we sold 1,811,238 shares of our common stock pursuant to our current Registration Statement

on Form S-3 (File No.

333-250072), resulting in net proceeds of approximately $3.4 million under the Sales Agreement which is

net of $112,000 in expenses consisting of commissions paid to Cantor in connection with these sales and other offering and accounting

As of March 31, 2021, we had $41.2 million available for sale under the Sales Agreement.

We believe that our existing capital resources,

together with interest thereon, will be sufficient to meet our projected operating requirements through at least March 31, 2022 which

includes an on-going clinical study for LPCN 1144, compliance with regulatory requirements, and on-going litigation activities.

based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently

expect if additional activities are performed by us including pre-commercial and commercial activities for TLANDO and new clinical studies

for LPCN 1144, TLANDO XR, LPCN 1148 and LPCN 1107.

While we believe we have sufficient liquidity and capital resources to fund our projected

operating requirements through at least March 31, 2022, we will need to raise additional capital at some point through the equity

or debt markets or through out-licensing activities, either before or after March 31, 2022, to support our operations, including,

if FDA approval is received, potential commercialization activities for TLANDO.

If we are unsuccessful in raising additional capital,

our ability to continue as a going concern will be limited.

Further, our operating plan may change, and we may need additional funds to

meet operational needs and capital requirements for product development, regulatory compliance and clinical trial activities sooner than

In addition, our capital resources may be consumed more rapidly if we pursue additional clinical studies for LPCN 1144, TLANDO

XR, LPCN 1148 and LPCN 1107.

Conversely, our capital resources could last longer if we reduce expenses, reduce the number of activities

currently contemplated under our operating plan or if we terminate or suspend on-going clinical studies or intellectual property litigation,

or if we terminate or settle any on-going litigation activities.

We can raise capital pursuant to the Sales Agreement when not restricted

due to terms of previous financings but may choose not to issue common stock if our market price is too low to justify such sales in our

There are numerous risks and uncertainties associated with the development and, subject to approval by the FDA, commercialization

of our product candidates.

There are numerous risks and uncertainties impacting our ability to enter into collaborations with third parties

to participate in the development and potential commercialization of our product candidates.

We are unable to precisely estimate the amounts

of increased capital outlays and operating expenditures associated with our anticipated or unanticipated clinical studies and ongoing

development and pre-commercialization efforts.

All of these factors affect our need for additional capital resources.

To fund future operations,

we will need to ultimately raise additional capital and our requirements will depend on many factors, including the following:

further clinical development requirements or other requirements of the FDA related to approval of TLANDO;

the cost and timing of pre-commercialization and commercialization activities in support of TLANDO;

the scope, rate of progress, results and cost of our clinical studies, preclinical testing and other related activities for all of

our product candidates, including LPCN 1144, TLANDO XR, LPCN 1148 and LPCN 1107;

the cost of manufacturing clinical supplies, and establishing commercial supplies, of our product candidates and any products that

we may develop;

the cost and timing of establishing sales, marketing and distribution capabilities, if any;

the terms and timing of any collaborative, licensing and other arrangements that we may establish;

the number and characteristics of product candidates that we pursue;

the cost, timing and outcomes of regulatory approvals;

the timing, receipt and amount of sales, profit sharing or royalties, if any, from our potential products;

the cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

the extent to which we acquire or invest in businesses, products or technologies, although we currently have no commitments or agreements

relating to any of these types of transactions;

the extent to which we grow significantly in the number of employees or the scope of our operations.

Funding may not be available to us on favorable

terms, or at all.

Also, market conditions may prevent us from accessing the debt and equity capital markets, including sales of our common

stock through the Sales Agreement.

If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of

or suspend one or more of our clinical studies, research and development programs or, if any of our product candidates receive approval

from the FDA, commercialization efforts.

We may seek to raise any necessary additional capital through a combination of public or private

equity offerings, including the Sales Agreement, debt financings, collaborations, strategic alliances, licensing arrangements and other

marketing and distribution arrangements.

These arrangements may not be available to us or available on terms favorable to us.

To the extent

that we raise additional capital through marketing and distribution arrangements, other collaborations, strategic alliances or licensing

arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research

programs or product candidates or grant licenses on terms that may not be favorable to us.

If we do raise additional capital through public

or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may

include liquidation or other preferences, warrants or other terms that adversely affect our stockholders’

rights or further complicate

raising additional capital in the future.

If we raise additional capital through debt financing, we may be subject to covenants limiting

or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we are unable, for any reason, to raise needed capital, we will have to reduce costs, delay research and development programs, liquidate

assets, dispose of rights, commercialize products or product candidates earlier than planned or on less favorable terms than desired or

reduce or cease operations.

Sources and Uses of Cash

The following table provides a summary of our cash

flows for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

Cash used in operating activities

$ (4,061,774 )

$ (3,376,262 )

Cash provided by (used in) investing

(33,994,221 )

Cash provided by financing activities

Net Cash From Operating Activities

During the three months ended March 31, 2021

and 2020, net cash used in operating activities was $4.1 million and $3.4 million, respectively.

Net cash used in operating activities during the

three months March 31, 2021 and 2020 was primarily attributable to cash outlays to support ongoing operations, including research

and development expenses and general and administrative expenses.

During 2021 and 2020, we were performing activities related to the LPCN

1144 LiFT Phase 2 paired biopsy clinical study.

During 2020, we also were performing activities around the submission of the TLANDO

Net Cash From Investing Activities

During the three months ended March 31, 2021

and 2020, net cash used in investing activities was $34.0 million compared to net cash provided by of $3.9 million, respectively.

Net cash used in investing activities during the

three months ended March 31, 2021 was primarily the result of purchasing marketable investment securities, net, of $34.4 million.

Net cash provided by investing activities during the three months ended March 31, 2020 was primarily the result of utilizing marketable

investment securities, net, of $3.9 million to fund operations.

There were no capital expenditures for the three months ended March 31,

2021 and 2020.

Net Cash From Financing Activities

During the three months ended March 31, 2021

and 2020 net cash provided by financing activities was $29.4 million and $4.9 million, respectively.

Net cash provided by financing activities during

the three months ended March 31, 2021 was attributable to the net proceeds from the sale of 16,428,571 shares of common stock pursuant

to January 2021 Offering resulting in net proceeds of $26.8 million and $3.4 million in proceeds from the sale of 1,811,238 shares

of common stock pursuant to the ATM, offset by $833,000 in debt principal repayments under the SVB Loan and Security Agreement.

Net cash provided by financing activities during

the three months ended March 31, 2020 was primarily attributable to the net proceeds from the sale of 10,084,034 shares of common

stock pursuant to February 2020 Offering resulting in net proceeds of $5.7 million offset by $833,000 in debt principal repayments

under the SVB Loan and Security Agreement.

Contractual Commitments and Contingencies

Long-Term Debt Obligations and Interest on Debt

January 5, 2018, we entered into a Loan and Security Agreement with SVB pursuant to which SVB agreed to lend us $10.0 million.

The principal borrowed under the Loan and Security Agreement bears interest at a rate equal to the Prime Rate plus one percent per annum,

which interest is payable monthly.

The loan matures on June 1, 2022 and we are required to make equal monthly payments of principal

and interest for the remaining term of the loan beginning on November 1, 2020 although there was a principal deferment period of

six months beginning on April 1, 2020 due to COVID-19.

We will also be required to pay the Final Payment Charge at maturity.

On April 21, 2020, we were

granted a Loan from SVB in the aggregate amount of $234,000, pursuant to the PPP under Division A, Title I of the CARES Act, which was

enacted March 27, 2020.

The PPP Loan, which was in the form of a Note dated April 21, 2020, originally matured on April 21,

2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 21, 2020.

Under the terms of the PPP,

certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

On November 2,

2020, we were notified by the Small Business Administration that our PPP Loan had been forgiven.

Purchase Obligations

enter into contracts and issue purchase orders in the normal course of business with clinical research organizations for clinical trials

and clinical and commercial supply manufacturing and with vendors for preclinical research studies, research supplies and other services

and products for operating purposes.

T hese contracts generally provide for termination on

notice and are cancellable obligations.

Operating Leases

In August 2004, we entered into an agreement

to lease our facility in Salt Lake City, Utah consisting of office and laboratory space which serves as our corporate headquarters.

March 3, 2021, we modified and extended the lease through February 28, 2022.

Critical Accounting Policies and Significant

Judgments and Estimates

management’s discussion and analysis of our financial condition and results of operations is based on our financial statements which

we have prepared in accordance with U.S.

generally accepted accounting principles.

In preparing our financial statements, we are required

to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and

liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances,

the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent

from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

There have been no significant

and material changes in our critical accounting policies during the three months ended March 31, 2021, as compared to those

disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies

and Significant Judgments and Estimates”

in our Form 10-K filed March 11, 2021.

New Accounting Standards

to Note 12, in “Notes to Unaudited Condensed Consolidated Financial Statements”

for a discussion of accounting standards

not yet adopted.

Off-Balance Sheet Arrangements

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements